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Mainland tourist arrivals in HK for July continued to grow compared to June. And as mainland tourists have not yet returned to overseas travel, it looks like the tourism recovery trend for HK will continue till the end of the year.
Retail rents are slowly recovering but still well below their historical highs (from 2012-2013). So for LF and CSS, these two factors could mean higher operating leverage in the second half of 2023 than the first. A well-managed F&B operator like Fairwood is another company I think will benefit from the above tailwinds.
Compared to the pre-covid years, HK is a shadow of its former self and property values are still falling. Mainland is suffering from lower exports due to economic weakness in its trading partners and 'de-risking.' Mainland manufacturers are reporting very poor numbers this season. Broad sentiment towards HK/mainland companies are very poor, but this could be an opportunity to pick up good companies.
At some point -- maybe 2-3 years from now -- inflation will ease, interest rates will fall, and global growth will resume. Assuming that gold prices and HK tourism continue to move higher under this scenario, the operating leverage enjoyed by the likes of LF and CSS could be even greater.
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Like many other stocks trading is totally stuck & dominated by automated back and forth trading of big, mostly overseas banks and brokerages.
Only active way out (aside passively waiting for sentiment changes) are share buy backs, not necessarily large amounts, but consistently on weak days. Best utilization of cash for debt free companies trading below book value.
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Chow Tai Fook results.
Net Profit 6499 Mill (1948 Mill in H2)
with gold hedging losses 4147 Mill (3990 Mill in H2).
Would have been a stellar result without hedging.
A bit embarrassing though, that they still remove hedging losses from their 'core earnings' computation, despite making hedging losses in every year since 2016.