A report from Macquarie said that while Liffock (00590.HK) had previously issued a profit warning that first-quarter revenue and profit would fall by 6% and 8% respectively, the bank said the worst had passed and expected an improvement in performance. At the same time, it is estimated that the company will be affected by the gold price trend and will drive gross profit performance. In the first half of fiscal 2021, earnings will fall by 64%, before reversing. The bank raised the company's target price from $20.4 to $29 and rated it “outperform the market,” believing the earnings recovery will drive the revaluation.

The Bank noted that the company's own- and franchised stores-to-store sales in the Mainland showed an improvement in only a low number of units in June. The trend is expected to continue in 7-8 months, leading to a resumption of overall revenue growth. The Hong Kong market remains volatile, with a weaker performance in July than June, but improved in August. Noteworthy is that the Macao market, which has seen the performance of wedding demand in the field of diamonds since the Mainland opened its signing to Guangdong tourists. Bookings in other parts of China will resume on 23 September, and management estimates that Macau will now recover strongly in the 11th golden week.

The Bank estimates that the company's gross profit margin will continue to expand, driven mainly by the price of premiums. It is estimated that the price of gold will increase by 10% per litre, the company's profits will increase by 6%, the management expects to benefit from the reduction in Hong Kong rents, rental expenses will fall by double digits. In the first half and the second half of the fiscal year, there will be a government subsidy of $4,000 million and $3,000 million, respectively.。 The company plans to net 200 and 2 branches in the Mainland and Macau, respectively, and close five in Hong Kong. (el/k) ~

ASDAK Financial News

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