CHOW SANG SANG HOLDINGS INTERNATIONAL LIMITED
（Incorporated in Bermuda with limited liability）
Stock code 股份代號 : 116
Company Analysis Report
Conduct by Wu Jing
With the high base of the first half of 2013, Chow Sang Sang’s turnover for the first half-year of 2014 dropped 34% to HK$9,333 million and profit attributable to equity holders declined 15% to HK$520 million, due to the lower gold price and demand for gold products. Operating profit dipped 13% from the prior year; while there is an improvement in margin thanks to the stable gold price and higher percentage of jewelry sales.
Year 2013 is a flourish year, despite of the slowdown of Chinese economy, credit tightening and new administration’s anti-corruption drive. The turnover of 2013 surged 38% and profits rose by 24% driven by consumers’ enthusiasm for gold products sparked by sharp gold price drops in April and June.
2012 was a year in which there was modest growth in revenue from the sales of gold and jewelry, with a rise of 6% in turnover, due to a marked cautiousness in consumer sentiments. The lower gold price and fierce discounting competition have a huge depressing effect on gross margin. Coupled with higher costs, net profits were down by 10%.
The strong growth in the company’s jewelry retail drove the 2011’s total turnover increased by 47% regardless of central government’s inflation-curbing, uncertain economic outlook and higher gold price.
The company’s turnover is subject to gold price volatility and consumer’s demand for gold products, while its profit is susceptible to increasing costs and fierce competition.
Chinese economy has been slowing down since 2010, with real GDP growth declining from 10.4% in 2010 to 7.4% for the first half-year of 2014 and Real growth of GDP per capita down from 9.9% in 2010 to 7.2% in 2013. Real interest rate kept growing from -0.8% in 2010 to 4.2% in 2013, while annual inflation rate has been declining from 4.57% in 2010 to 2.51% in 2013. This shows an increasingly tightening money situation in mainland China, in which people are less willing to spend.
Hong Kong has also seen a slowdown in the economy growth, except a turnaround in 2013. Real GDP growth in Hong Kong has been falling from 6.8% in 2010 to 1.5% in 2012, bounced to 2.9 in 2013 and dropped again to 2.2% in the first half-year of 2014, while its GDP per capita growth has been descending from 6.0% in 2010 to 0.4% in 2012 and bounced to 2.5% in 2013. Hong Kong’s real interest rate was low at 1.0% and 1.3% in 2011 and 2012 respectively and rose to 3.6% in 2013, as inflation rate was relatively high at 3.9% and 3.7% respectively in 2011 and 2012 and dropped to 1.4% in 2013. The growth of the number of mainland tourists arrivals in Hong Kong has been increasing from 16.4% in 2011 to 16.7% in 2013 with a surge of 24.2% in 2012.
The pace of economic slowdown in Macau is much more rapidly. Macau’s real GDP growth has been falling from 27.5% to 11.9% in 2013, with a sharp dip to 9.1% in 2012. Its GDP per capita kept descending from 24.4% to 10.0%, with a corresponding dip to 7.1% in 2012. The real interest rate of Macau kept declining from 0.6% in 2010 to -2.2% in 2013, whereas inflation rate has been rising from 4.6% in 2010 to 7.6% in 2013. This indicates an increasingly loose monetary condition. Taiwan
Taiwan’s economy has been under pressure as its exports suffered from the global downturn generally and from competition with Korea in particular. Taiwan’s GDP has been sinking from 10.76% in 2010 to 1.48% in 2012 and rebound to 2.09% in 2013, while its GDP per capita correspondingly dipped from 13.11% in 2010 to 1.82% in 2012 and rose again to 2.59% in 2013. But its economy is expected to have a better performance this year. Taiwan’s central bank has been keeping its discount rates at 1.88% from 2011 to 2013, while its...
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