But here's why it didn't impress analysts.
According to Barclays, Sa Sa’s 3Q FY14 Hong Kong/Macau sales were up 17.4% y/y, slightly lower than its expectation of an increase of 18.5%.
What came as a surprise to us was that 3Q FY14 saw y/y deterioration in the gross margin due to the onset of promotions to drive sales growth.
We see slight downside risks to Bloomberg consensus estimates due to the lower-than-expected gross margins. The stock is trading on 21x FY15 (Mar-end) P/E based on the latest Bloomberg consensus estimate.
However, as we highlight later in this note, sales trends could see improvement after December, and management plans to fine-tune its promotional strategy.
We keep our earnings estimates and Overweight rating unchanged but plan to closely monitor sales trends, management execution and longer term threats in the competitive landscape.
3Q FY14 sales saw a pickup relative to 2Q, but sales trends slowed in December; gross margin deteriorated due to promotions
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