STOCKWATCH: Jusco Stores higher after year to Feb results

HONG KONG (AFX-ASIA) - Jusco Stores (Hong Kong) Co Ltd shares were sharply higher in midmorning trade after releasing better-than-expected year to February results on Friday, analysts said.

	    The strong results were a reflection of the efforts taken by the company to cut costs and improve margins, they added.

	    Jusco Stores closed the morning up 0.17 hkd or 11.409 pct at 1.66 on volume of 1.66 mln shares. It earlier hit a high of 1.77 hkd.

	    The company reported a year to February net profit of 92.23 mln hkd, up from 32.51 mln the previous year. This was achieved on sales of 3.39 bln hkd, from 3.27 bln hkd previously.

	    Operating profit improved considerably as well, rising to 97.44 mln hkd from 52.08 mln.

	    An analyst with a local brokerage said the company posted "great results" with improved margins.

	    "All the effort taken by the company has started to show results." 

	    She said the company had ensured that it offered a more diverse merchandise range to meet customer needs.

	    In addition, it had re-negotiated the rental terms with its landlord which will see it reducing rental expenses.

	    She said Jusco was now trading at a PE ratio of 4.6 times on historical results but said the yield on the stock was "much, much better than returns placed in the bank."

	    She said given the 13 cent dividend proposed by the company for the year to February, the yield on the stock would be around 8-9 pct.

	    The company paid a 1.0 cent interim dividend.

	    She said the company's share price had already risen on Friday after its results and that she was not surprised that it has extended its gains.

	    "However, I think the shares will take a breather for a while. It hit 1.77 hkd before retreating today," she said.

	    She has placed a fair value of around 1.80 hkd on Jusco Stores.

	    She said the downside on the stock is "quite limited", adding that the stock had been lingering below 1.00 hkd for quite a long time.

	    "However, the market will turn cautious soon. There are still some uncertainties on the outlook for this year, with the U.S. slowdown as well as regional and Hong Kong's economic slowdown."

	    She said technically, the company itself was a good one, and has done a good job of turning itself around, but said the economic scenario in Hong Kong may be against it in the current financial year.

	    "The economic situation in Hong Kong will deter any spending desires at the moment. The first quarter retail figures (for Hong Kong) were not very encouraging," she said.

	    However, the analyst believes that Jusco Stores will be able to maintain margins and still record profits in the current financial year.

	    "But of course, one cannot expect sharp jumps in net profit for this year," she added.

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