by winston » Thu Sep 29, 2011 10:41 am
not vested
Li & Fung (494 HK, Neutral) - A strong franchise, but may remain range-bound( HKD12.82 / PT: HKD14.10 )
Action: May remain range-bound in near term; but weakness may be good entry point for long-term exposure. Downgrade to NEUTRAL
Cost pressure hit Li & Fung’s (LF) margins and core operating profit fell 17% in 1HFY11.
We expect the company to realise cost savings and distribution margins to rebound, but the threat of macro weakness may remain an overhang.
We think bad macros may not be as bad for LF as it gains market share and acquisition opportunities may come cheap, but the ~87% sales exposure to developed markets may keep a lid on re-rating.
We think it will remain range-bound for a while, and thus, following transfer in coverage, we downgrade to NEUTRAL. However, we do believe LF is a strong franchise and any weakness provides a good long-term entry point.
Source: Nomura
It's all about "how much you made when you were right" & "how little you lost when you were wrong"