Nomura lowered its target price for Luk Fook Holdings (00590) to HK$20.2 from HK$25.4 and maintained its "neutral" rating.
The research house said Luk Fook's 2Q FY2020 overall SSSG further deteriorated to -37% (1Q: -10%), with HK and Macau/China SSSG at -39%/-25%, respectively, versus -10%/-7% in 1Q.
Similar to CTF (01929), Luk Fook's gold sales were much weaker versus gem-set with gold SSSG at -46% in HK & Macau and -28% in China. The company expects rental reduction for renewals to accelerate to a double-digit decline in FY2021, versus the single-digit drop in FY2020.
Nomura believes Luk Fook's higher reliance on the HK market (62% of total sales in FY2019, versus CTF's 70% of sales from China in 1H FY2020) will continue to weigh on its
overall sales, given the intensified protests in HK.
Nomura cut its FY2020 SSSG assumption for Luk Fook's HK business from -5% to -27%. It lowered its FY2020/21 earnings estimates by 24%/21% after factoring in lower sales and OPM.
18/10/2019 10:08
{I-bank focus}Nomura lowers Luk Fook (00590) to HK$20.2
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