Wednesday, October 16, 2013

Trinity (891) :4Q performance is key; Hold 15 October 2013

Deutsche Bank Markets Research

Based on comments from department stores (such as Golden Eagle and 
NWDS), mature menswear is one of the weak categories with SSS growth 
performance falling below average. For more information about performance 
in other categories, please refer to Winnie Mak’s alert China Department Stores 
- Stabilized, awaiting recovery, published on 15 October 2013. 
 
For China, we expect 3Q performance to be in line with 1H13’s performance 
with no further deterioration in sales or SSS performance. However, it is too 
early to say that it has bottomed out, as 3Q is normally a low season for 
apparel. Hot weather also affects the sale of fall/winter products. As 
management mentioned in previous meetings, 4Q performance is key to 2H 
performance; hence, visibility remains low. 
 
For Hong Kong, we expect sales growth to remain decent. For reference, 
around 60% of sales in its Hong Kong stores come from PRC tourists, with the 
rest from local consumers (30%) and international tourists (10%). Meanwhile, 
the Taiwan operation has bottomed out, as mentioned during the 1H13 results 
meeting in August. 
 
We maintain Hold as we believe the stock is fairly valued. Recent strong share 
price movement might be due to the expectation of SSS growth bottoming 
out, just like for other China discretionary plays.

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