Ming Fai International (3828 HK) Latest corporate announcement

to summarize…

 On January 16th, 2012, the group announced profit warning for the year ended 31 December 2011. The decrease is attributed to increasing in cost pressures in the PRC, disappointing sales from the new retail business: 7 Magic. The new laundry business and everyBody Labo brand continues to record losses.

 We believe that sales for the hotel and airline business should continue to have strong growth, but profit will be hurt from higher operating costs. Gross margin at the end of 1H FY06/11A is around 24%, down from 27% at the end of FY2010A. We estimate that there’s a chance for full year gross margin to be around twenty percent.

 We estimate that 7 Magic should have approximately 1,700 shops by the end of FY12/11F. 2H FY12/11F performance was disappointing due to economic slowdown and increased in operating cost, thus may fall short of the management previous expectation.

 We revised our revenue for FY12/11F to be HK$1,376.8m from HK$1,429.4m, a 27% YoY increase. With HK$1,169.6m contribution from the hotel and airlines amenities business and HK$198.4m contribution from the retail business. We forecast net profit to be HK$78.0m for FY12/11F, representing a

29% YoY decrease.

 We maintain our coverage with a Hold recommendation at a target price of HK$1.30. Our target price represents 8.5x FY12/12F P/E and 6.3x FY12/13F P/E.

Ming Fai International (3828 HK) Latest corporate announcement