[ET Net News Agency, 9 February 2018] UBS Global Research lifted its target price for
Chow Tai Fook Jewellery (CTF)(01929) to HK$11 from HK$9, and upgraded its rating to "buy"
from "neutral".
The research house said, during its recent global marketing trip, most investors
recognized the sales recovery and end of the rental downtrend in Hong Kong. But UBS thinks
they might have underestimated the financial impact of the rental reduction, which will
lead CTF to open more stores in residential areas and reduce exposure to tourist areas.
UBS estimated if CTF can open three stores in residential areas for each store it closes
in a tourist area, it would lead to material rental savings while generating a similar
level of revenue. As a result, the research house lowered its operating expense (opex)
assumptions for upcoming years.
It lifted its FY2019-21 earnings estimates 4-10% due to improved control of rental and
staff costs. UBS lowered its FY2019-21 rental cost to sales estimates 30-50 bps and its
FY2019-21 staff cost to sales estimates 20-50bps. (KL)