Luk Fook (0590)

[weijian]

六 and 大 actually looks similar. Can’t fault their ingenuity 😂 to combine and have the best of both brands

What you said brings to mind a certain shoe company that has yet surpassed the real Nike 😄

I would have thought Under Armour wouldn't win. But they did.

https://www.slwip.com/resources/under-ar...rk-battle/

[bmann025]

Some action from this week:

1) Chow Sang Sang alerted with record high half year earnings, HKD 800-850 Millions, middle equals HKD 1.22 per share for 6 months.

2) CEO Wong Wai Sheung bought long positions on 31/7/2023 & 1/8/2023 (Reason 11034), increasing his stake from 43.47% to 43.94%. LF was trading between 20.25-21.20 on these days.
He previously increased his holding similarly (Reason 11034, but also on market purchases) in 2022 from 43.23% to 43.97% between 28/7/2022 and 28/10/2022, and offloading later at significantly higher prices.
Difference from last year is that he made much more smaller purchases last year for about the same increase in holdings, and that last years purchases were mostly at lower prices.
https://di.hkex.com.hk/di/NSNotice3AList...g_lang=en&

[karlmarx]

Mainland tourist arrivals in HK for July continued to grow compared to June. And as mainland tourists have not yet returned to overseas travel, it looks like the tourism recovery trend for HK will continue till the end of the year.

Retail rents are slowly recovering but still well below their historical highs (from 2012-2013). So for LF and CSS, these two factors could mean higher operating leverage in the second half of 2023 than the first. A well-managed F&B operator like Fairwood is another company I think will benefit from the above tailwinds.

Compared to the pre-covid years, HK is a shadow of its former self and property values are still falling. Mainland is suffering from lower exports due to economic weakness in its trading partners and 'de-risking.' Mainland manufacturers are reporting very poor numbers this season. Broad sentiment towards HK/mainland companies are very poor, but this could be an opportunity to pick up good companies.

At some point -- maybe 2-3 years from now -- inflation will ease, interest rates will fall, and global growth will resume. Assuming that gold prices and HK tourism continue to move higher under this scenario, the operating leverage enjoyed by the likes of LF and CSS could be even greater.

[bmann025]

Like many other stocks trading is totally stuck & dominated by automated back and forth trading of big, mostly overseas banks and brokerages.

Only active way out (aside passively waiting for sentiment changes) are share buy backs, not necessarily large amounts, but consistently on weak days. Best utilization of cash for debt free companies trading below book value.

[bmann025]

GSP wrote an interesting article about investing in HK in general, emphasizing the importance of buy-backs and higher pay-out ratio (incl increasing pay-out in such times), especially for family run companies.

Also includes interesting discussion of some individual stocks like Modern Dental 3600.hk

https://www.globalstockpicking.com/2024/...k-picking/

[bmann025]

Chow Tai Fook results.
Net Profit 6499 Mill (1948 Mill in H2)
with gold hedging losses 4147 Mill (3990 Mill in H2).

Would have been a stellar result without hedging.

A bit embarrassing though, that they still remove hedging losses from their 'core earnings' computation, despite making hedging losses in every year since 2016.

[bmann025]

Impressive FY results from Luk Fook.
Now trading at a historical low PE of 5.5.
HK, Macau & overseas doing very well.
Good pace of expansion in all markets.
Hedging losses MUCH lower than CTF or CSS.
Negative is slight reduction in the payout ratio, falling out of time and investor requirements.
https://www1.hkexnews.hk/listedco/listco...801328.pdf

[bmann025]

Yesterday's remarkable Positive Profit Alert deserves a little writeup:
https://www1.hkexnews.hk/listedco/listco...000640.pdf

An 80%-90% increase in profit would end up at a FY profit of approx HKD 3.46, finally a new record, beating the the results from the gold rush year 2014 of HKD 3.17.
The 2nd half of the year would have contributed approx HKD 2.41, by far (I think) topping the previous best half year.

Luk Fook has been a 'hidden' growth story all the time, with the increase of its footprint in mainland to thousands of retail outlets. Macau was a great growth story as well.
However, several headwinds prevented this growth from materializing into an overall growth story.

First earnings in Hong Kong were dragged down by protests and the decline in mainland visitors,
then by several economics crisis. In addition, the growing footprint in mainland cannibalized some of HK's business.

Then more headwinds joined from mainland. Gem set jewelry, long time the main source of income in mainland, came out of fashion. Competition become fierce. Then suddenly gold shot up and led to reductions in sale volumes and huge increases in hedging losses.

But now tailwinds have taken over:

1) Chow Tai Fook started to shut down non profitable outlets, and competitors followed suit. They are playing tit-for-tat, and they all profit from this.
2) Laopu Gold demonstrated there is a market with exceptional margins for sophisticated designs. All majors are now into higher margin gold products.
3) Hong Kong is finally recovering, for instance the issue of golden visa was a stunning success fetching many billions USD of investment.
4) Luk Fook's overseas stores are finally making a notable impact.
5) The recent tax increase on jewelry in mainland has likely shifted some of the sales back to Hong Kong and Macau. Luk Fook benefits in particular its large footprint in the city. Jewelry retail sales in HK increased > 20% in the first 4 months 2026.
6) Gold prices have receded from the top. This has capped hedging losses and is likely to increase sales volumes.

So next half year report looks already promising as well.

[bmann025]

Massive confirmation of above thesis by Chow Sang Sang positive profit alert.
https://www1.hkexnews.hk/listedco/listco...700999.pdf

[bmann025]

Massive confirmation of above thesis by Chow Sang Sang positive profit alert.
https://www1.hkexnews.hk/listedco/listco...700999.pdf

'Massive' because Chow Sang Sang's previous interim result, which they now beat by >100%, was already their best half year on record with an EPS of HKD 1.34.