Company Report Please see important notice on the last page. 1 of 7SA SA INTL HLDGS(00178.HK) Sa Sa Int’l announced its updated operational results for 3Q2010. Sales revenue increase 10.9% YoY. Markets in Hong Kong and Macau saw a YoY retail sales growth of 8.2%, with a SSS growth of 5%, thanks to the increasing number of Mainland visitors and improved consumption sentiment. The retail network expanded to 168 outlets as at 3Q2010. We have following investment themes for Sa Sa. 1. More than 30 yrs cosmetics operating history with leading market position in Asia. Sa Sa has achieved stable revenue growth even during economic downturns such as Asian Financial Crisis (1997), SARS (2003), Financial tsunami and H1N1 (2009). We view Sa Sa has strong execution ability in dealing with tough operating environment. 2. High gross margin (~43%), High dividend yield (~4%), high payout ratio (~100%) and sound balance sheet. 3. Turnaround in Mainland operation. We expect the loss from mainland business will be further narrowed, and eventually achieve a breakeven in FY2011. We downgrade Sa Sa from BUY to OUTPERFOM with target price of HKD 6.10, translating into 22x2011PE. Outperform (prior：Buy) TP：HK$ 6.10 Comments on operational update for 3Q2010 Current price：HK$5.47 China Merchants Securities (HK) Ying LIANG 83734442 ly@cmschina.com.cn 14 Jan 2010 Key data HSI Index 21748.60HSCEI Index 12482.18S/O（mn） 1381S/O (HK)（mn） 1391Mkt cap (HK) (mn) 7649BVPS（HKD） 0.81Major share holder Holding (％)Free float 32.12Industry 1H2010 Results Review Sales revenues increased by 8.3% to HKD 1.76 bn, net profit increased 40.9% to HKD 123 mn. The gross profit margin in HK and Macau business increased by 1% to 43.7%, mainly due to improved inventory management and effective cost control measures. We expect HK and Macau business will continue to benefit from the individual visit scheme and trading-up consumption. Share performance %1m 6m12mAbsolute return 7 68Relative return 11 42 -40-20020406080Ja n- 09M ay -0 9A ug -0 9De c- 09(%)00178. HKHS I Ind ex Source：Bloomberg Sa Sa recorded turnover growth of 70.2% to HKD 42.2mn and a 14.6% increase in SSS in Mainland China. The loss was narrowed from 14.5mn to 10.9mn. In our view, Mainland market has much potential to explore, we expect Sa Sa to achieve breakeven in FY2011 through network consolidation in Mainland market. Related research Financials 31/03 HKD 2008 2009 2010E2011E 2012ERevenue 3221.4 3609.0 4078.2 4730.7 5416.6 Growth(%) 11.5% 12.0% 13.0%16.0%14.5%Net income 348.2 316.0 339.7 391.9 447.1 Growth(%) 57.0% -9.3% 7.5%15.4%14.1%EPS(Yuan) 0.25 0.23 0.24 0.28 0.32 DPS(Yuan) 0.21 0.23 0.24 0.28 0.32 P/E(X) 21.6 23.9 22.4 19.4 17.0 P/B(X) 6.8 6.7 6.6 6.3 6.0 ROE(%) 31.4% 28.2% 29.6%32.5%35.3%Source: Company data, CMS(HK) estimate 公司报告优于大市 莎莎国际(00178.HK) (上次：买入) 莎莎近日公布2010财年前三季度运营数据（截止09年12月31日止）。营业额同比增长10.9% （上半年同比增长8.3%）。由于港澳地区仍然是莎莎收入的主要来源，受益于港澳地区游客人数增加及消费者信心改善，港澳地区零售营业额增长8.2% （上半年为同比增长5.1%），同店销售增长5%（上半年为2.5%）。 增速均进一步提高。我们认为莎莎的主要投资亮点有：1. 30多年的化妆品经营历史，公司在应对97亚洲金融危机、03年SARS、08年金融风暴及09年甲流等不利环境造成冲击时更有经验。2. “三高一低”。高毛利率（~43%），高股息收益率（~4%，以今日收盘价计），高派息率（~100%）及较低的资产负债率（~23%），我们预计2011财年公司的“三高一低”得以继续保持。3. 内地业务稳步拓展，扭亏有望。我们预计未来莎莎将进一步执行多元化发展策略，稳固港澳本地市场，发展港澳以外市场，特别是强化对中国内地市场的拓展。基于22x2011PE，我们给予莎莎目标价6.10港元，评级由“买入”调低至“优于大市”。 2010财年前三季度营运数据点评 目标价：HK$ 6.10 现价：HK$5.47 招商证券(香港)研究部 梁盈 83734442 ly@cmschina.com.cn 2010年1月14日 基础数据 恒生指数 21748.6012482.18H股指数 1381总股数（万股） 1391港股股数（万股） 7649港股市值(港元百万) 0.81每股净资产（港元） 2010财年中报回顾 营业额同比增长8.3%至17.6亿（港元，下同），净利润同比增长40.9%至1.2亿元。毛利率由09财年同期的42.7%增至43.9%，毛利率上升除了由于公司严格控制成本外，主要由于开设5间特卖场，大量减少存货，令存货拨备金额由2175万元大幅下降至470万元。 持股(％)主要股东 32.12自由流通量 行业 股价表现 港澳地区营业额增长3.9%至13.9亿元，净利上升15.5%至1.1亿元。由于改善了店铺管理及产品组合，中国内地业务营业额增长70.2%至4220万元，亏损由09财年同期1452.6万元收窄至1093.3万元。我们认为虽然内地业务持续亏损，但仍是莎莎未来最大发展潜力的市场。 我们预计公司通过增加门店，减少开支，未来2年会继续收缩亏损，收支平衡有望。 %1m 6m12m绝对表现 7 68相对恒指表现 11 42 -40-20020406080Ja n- 09M a y- 09A ug -0 9De c- 09(%)00178. HKHSI In dex 门店拓展计划 截止09年12月31日，莎莎共有门店168家。预计至2010年3月底，门店总数增至179家。于2011财年，公司目标门店网络大幅提升至241家。 盈利预测及估值 3月31日港币百万元 2008 2009 2010E资料来源：彭博 相关报告 2011E2012E营业额 3221.4 3609.0 4078.2 4730.7 5416.6 同比增长(%) 11.5% 12.0% 13.0%16.0%14.5%净利润 348.2 316.0 339.7 391.9 447.1