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DBS: Luk Fook Holdings International Ltd – Buy Target Price HK$30.01

Posted on October 20, 2022October 20, 2022 By alanyeo No Comments on DBS: Luk Fook Holdings International Ltd – Buy Target Price HK$30.01
<Results First Take> Luk Fook: 2Q FY23 operating data above expectations; maintain BUY
  • Luk Fook released its operating data for 2Q FY23 (i.e., Jul-Sep 2022) with overall same store sales growth (SSSG) of +40% y-o-y (1Q FY23: -1%) even on high base, slightly above expectations.
  • Softer gold prices supported outstanding gold product sales that scored a +62% SSSG in 2Q FY23 (1Q FY23: +9%), versus -8% SSSG (1Q FY23: -19%) for fixed price jewellery.
  • HK/Macau saw +50% SSSG in 2Q FY23 (1Q FY23: +2%), along with SSSG of +79% for gold products and -10% for fixed price jewellery. Divisional revenue rose by c.30%. 
  • Specifically, HK alone saw +70% SSSG, mainly driven by SSSG of +98% for gold products and a single-digit growth for fixed price jewellery. Macau registered flattish performance amid its COVID-19 resurgence and citywide lockdowns, with SSSG of +25% for gold products and a double-digit decline for fixed price jewellery.
  • Mainland China registered -4% SSSG across its self-operated stores in 2Q FY23 (1Q FY23: -28%), which included SSSG of +3% for gold products and -23% for fixed price jewellery. Coupled with its e-commerce sales that surged by 8% during the quarter (1Q FY23: +30%), Mainland China retail revenue remained flattish in 2Q FY23. As for Luk Fook’s licensed stores that represented 97% of its total no. of stores in Mainland China, they recorded SSSG of -2%, along with SSSG of +6% for gold products and -19% for fixed price jewellery. Divisional revenue from Mainland China (inclusive of licensed stores) went up by +7%.
  • Mainland China saw a net addition of 121 stores during 2Q FY23 to make a total of 2,893 stores as of Sep 2022. Together with another 60 stores in HK/Macau, and 13 stores in overseas markets, its grand total reached 2,966 stores as of Sep 2022.
  • Latest performance during 1H of Oct 2022 maintained considerable growth in HK/Macau, along with rising demand for gold products and an increase in visitor arrivals due to the resumption of quarantine-free travel between Macau and Mainland China. On the other hand, the Mainland China market saw a double-digit decline in SSSG during the same period given tighter COVID-19 restrictions.
  • We will be hosting a group conference call for Luk Fook at 2.30pm on Thurs (Oct 20). More will be followed after the call and please let us know if you’d like to join. Thank you.

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