Sasa International: Being Impacted By The Cold Wave, How To Save Hongkong?

Sasa International Holdings Limited is a comprehensive enterprise listed on the Hongkong stock exchange. The number of stores at its peak has reached 287. The products sold basically include daily cosmetics, perfume, make-up and hair care brands on the market, mainly through parallel importation, full power agency and local supply brand purchase channels.

In early 2019-2020, Hongkong's retail industry suffered an unprecedented cold wave and a series of shocks to Hongkong. As a local traditional retailer in Hongkong, Sasa international, the stock price reached a low point in the past ten years as external events entered the mud trap. Hongkong's data show that the provisional estimate of retail sales in Hongkong in 2019 was HK $431 billion 200 million, down 11.1% from the same period last year, of which drugs and cosmetics fell by 13.2%.

The internationalization of stores is a spectacular blueprint drawn by Sasa in the past to the capital market. Sasa can be seen in Macao, Singapore, Malaysia, Taiwan and Mainland China.

In the face of the Wuhan epidemic sweeping across the country, on January 25th -31, the consumption of customers in Hongkong was cold, and the number of mainland visitors dropped by 85.5%. The retail sales of Sasa, Hongkong and Macao stores fell by 77.9% and 73.4% respectively. In January 2020, the number of mainland visitors to Shenzhen was only 3 million 200 thousand, down 53% compared with the same period last year. At the end of January, the ports between Hongkong and Hong Kong were basically closed. Although February has not yet ended, it is almost impossible for the port to be opened for a short period of time. When the port opens, it is unknown, and it will take some time to open the mainland port to retaliatory consumption.

In order to save the company's embarrassing economic situation for Sasa international company, all its executive directors cut their salaries automatically for 75% or three months, closing all departments in Hongkong stores, layoffs and unpaid vacations, and promoting sales to inventory, etc. all eighteen of Wu Yi are put on the table. In the 2018 fiscal year, Sasa spent about HK $1 billion 170 million on the annual salary of artificial labor. Because of the sharp drop in sales in Hongkong, it is difficult for the company to bear the huge cost. If we want to maintain the same number of personnel, it is far from enough to rely solely on government assistance.

High dividend is a major feature of Sasa international in the past. The cumulative cash dividends in the past 2006-2018 years amounted to HK $6 billion 379 million, with an average dividend yield of 95.92%. In recent years, the dividend payout ratio was even more than 100%. As of February 14, 2020, Sasa's international closing price was HK $1.50 / share. In the past, the stock price ended to HK $1.3 / share, a record low of nearly ten years.

Sasa international, which has not yet opened up the huge mainland market, has no choice but to rely on the Hong Kong and Macao markets. The Hong Kong and Macao market also depends on the mainland's visitors to Hong Kong and Macao and the floating exchange rate of RMB.