Maintain BUY and fine-tuned TP to HK$ 8.07, based on 16x FY21E P/E (rolled over from 16x FY20E P/E as it should not be distorted by virus outbreak). JS Global, thanks to its product nature and channels (e-commerce, household and cooking appliances skewed), in our view, will meaningfully outperform the industry. Together with its special dividend (~9% yield) and valuation of 13x FY21E P/E, the stock is highly attractive (vs China/ Int’l peers’ avg. of 21x/ 15x).
- FY19 adjusted net profit missed by 12% due to higher admin costs, but special dividend is a surprise. FY19 adjusted net profit grew by 126% YoY to RMB 136mn, below CMBIS/ BBG’s est. by 12%/11%, due to: higher staff costs and other opex. We are not too worried as investments in personnel are generally positive for future growth. Special dividend of HK$0.5717 per share was also announced, implying a payout ratio of 594% and 9% yield.
- Joyoung’s growth in FY20E is intact. Joyoung sales grew by 9% YoY in FY19, thanks to the launches of “SKY” premium product series. Even with drags by COVID-19, we are still confident on sales growth in FY20E (est. 13% YoY), thanks to: 1) efficiency boosted by Business Units (BU) reforms, 2) launches of more mass market products (expanded ASP range from RMB 3,000 to 1,000) and 3) quick adoption of live-stream e-commerce. Management pointed out sales recovery in Mar 2020 was exceptionally well.
- We remain optimistic on SharkNinja’s growth in FY20E despite virus uncertainty. SharkNinja did very well in FY19, thanks to Ninja Foodi series’ impressive momentum. We are still optimistic for FY20E (est. growth of 13%), because: 1) more innovative products to be released in 3Q20E, 2) e-commerce growth will likely accelerate, as consumers shift to online and robust demand on DIY cooking was induced under the stay-at-home orders.
- Pressure from tariff will be eased in FY20E. We expect the drags from tariff to be less in FY20E (US$ 76mn worth of tariff was recognized in FY19), because: 1) certain products was granted exception since Nov 2019, 2) potential refund of tariff paid in FY19, 3) retail ASP had been raised to help offset and 4) certain supply chain will be shifted to Vietnam and Thailand.
- Finance costs shall decline. The Company had carried out a numbers of refinancing in Jan-Mar 2020, and the level of interest cost improved from ~ LIBOR + 4.3% in FY19 to LIBOR +1.8% in FY20E, a very meaningful cut.
- Maintain BUY and raised TP to HK$ 8.07. We cut FY20E/ 21E EPS estimates by 17%/ 13%, to factor in the higher staff costs. We maintain BUY but lift TP to HK$ 8.07, as we rolled over to 16x FY21E P/E (from 16x FY20E P/E). Valuation is fairly attractive at 13x FY21E P/E plus its 9% yield, vs China/ International peers’ average of 21x/ 15x FY21E P/E.
