Net profit from continuing operations went up 14.4% yoy to HK$316m in FY09. Results were above market and our expectations (consensus: HK$268m; UOBKH: HK$273m) as a result of an improvement in the Malaysian market and sasa.com. While the regional consumer market was severely affected in Oct 08-Mar 09, Sa Sa still managed to achieve an organic earnings growth of 21.3% yoy during the period.
Sa Sa’s Hong Kong retail sales have softened in recent months, but this situation is not a major concern and will not last long. The three key growth areas (Malaysia, China and sasa.com) should create buying interest.
We have raised our FY10, FY11 and FY12 earnings forecasts by 16%, 35% and 35% respectively to reflect our positive view.
We feel Sa Sa has reached a major milestone. All of its markets and business units registered improvements in FY09. More importantly, the Malaysian operations and sasa.com will become more and more significant. There are signs that Sa Sa has found the right formula for its mainland China operations, with newly-opened stores being profitable in the first month of operation. The stock is trading at 11x FY10 PE, 8.5% dividend yield and 0.5x PEG. We raise our target price to HK$4.50 (based on 18.9x FY10 PE, historical average PE), representing 0.8x PEG.
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