BEST SMALL CAP COMPANY
Dorsett Hospitality International
Dorsett Hospitality International’s ‘Chinese Wallet’ strategy is paying dividends. The Hong Kong-based hotel chain, which focuses on meeting the needs of Chinese visitors, reported a 9.5% year-on-year increase in gross profit to HKD316.9 million (US$40.89 million) for the six months to September 30 on the back of a 11.1% rise in revenues to HKD554.4 million.
It also scores highly on occupancy rate, one of the main benchmarks for measuring hotel success, with a 93% rate in Hong Kong which accounts for two thirds of its revenues.
The company’s focus is not limited to Hong Kong. The chain, which rebranded from Kosmopolito Hotels International in August, is also following the Chinese wallet abroad. In October it bought a second London property in Aldgate for £14.05 million (US$22.5 million), which it plans to convert into a hotel. It also owns hotels in Malaysia – its second biggest market after Hong Kong – Singapore and China.
Active management of its property portfolio it a characteristic of Dorsett’s management and this year it also acquired a building in Kwai Chung, Hong Kong for HKD210 million and sold its Kennedy Town-based hotel for HKD800 million.
Its strong performance this year has helped its share price to return 58.82% in the year to December 1.
BEST MEDIUM CAP COMPANY
Sa Sa International
Retailing in Hong Kong has always been an ultra competitive landscape and the environment is becoming even more challenging. The city’s retail sales slowed to just 4% in October from a high of 17.1% in March.
Yet despite the deteriorating conditions Sa Sa International has managed to deliver robust sales and profit growth making it ASIAMONEY’s best mid-cap corporate in Hong Kong for the third year running.
For the six months to September 30, turnover grew 21.2% to HKD3.4 billion on the same period a year earlier. Gross profit rose 26.1% to HKD1.5 billion.
Sa Sa’s management has responded to the downturn in Hong Kong by increasing its range of lower-priced products which helped it to deliver a 16.8% growth in same store sales. It also benefits from being in positioned in the defensive sector of cosmetics and is a favourite with the millions of mainland tourists that visit the city every year.
The brand does have challenges to face. Sa Sa’s growth in China weakened to 5.9% from 10.5% of last quarter of its 2012 fiscal year. And Macquarie forecasts that rental inflation for street retail space could be as high as 12% in 2012/2013 and if overall consumer sales continue to decline this could put pressure on margins.
But with 10 analysts having a buy or outperform rating on the stock, according to Reuters data, the company should continue to perform well into 2013.
BEST LARGE CAP COMPANY
Hutchison Whampoa
2012 was not a vintage year for any of the family-run conglomerates which dominate Hong Kong’s large cap space, but Hutchison Whampoa stands out from crowd.
The tougher trading environment amid an environment of slowing global growth has made it difficult for even the most diversified of companies. Yet despite this the company managed to deliver double digit growth in its pre-tax profits for the six months ending 30 June 2012.
Profit before tax rose 10% to HKD18.1 billion for the period while total revenue grew 6% to HKD195 billion. This is all the more impressive considering 41% of all of Hutchison’s revenue comes from Europe, with the majority of that in the retail and telecommunication sectors.
Expansion has remained a part of Hutchison’s strategy this year. Its clothes and consumer good arm, Li & Fung, has stressed growth through acquisitions. In April it bought UK tailor Gieves & Hawkes, while in November it issued a US$500 million perpetual bond to support its M&A plans. Additionally, Hutchison is awaiting approval from the European Union for €1.3 billion (US$1.7 billion) offer for the mobile operator Orange Austria in 2011.
The conglomerate’s management has also taken steps to improve the transparency of the information it gives to investors. In the third quarter of 2011 it started providing a greater level of information on everything from the valuation of unlisted assets to details of development pipeline and income of its property portfolio.
BEST EXECUTIVE
Guy Look, CFO and executive director, Sa Sa International
In a year in which corporates have raised record amounts of debt in Asia it’s rare to find one without loans or bonds on its balance sheet. But that’s how Guy Look, chief financial officer of Sa Sa International has managed the retailer’s finances.
In the six months to September 30, the company had net cash of HKD372 million (US$48 million). Sa Sa’s dearth of debt is particularly impressive given that it is expanding in Hong Kong and China. During the period the company added a net seven new Sa Sa stores as well as renovated a number of others in its home marketwhile in China opened a net five stores. Yet rather than take on debt Sa Sa has funded growth and upgrades through operational cash flows.
This strategy has helped the company deliver a return on equity of close to 40% for the fiscal year 2012 (ending March 31). It’s a healthy position to be in, and offers plenty of firepower in the event Sa Sa sees any need to splurge on an acquisition or intensive organic expansion.
Look who has been CFO since he joined the company in 2002, has plenty of experience in the consumer space. Prior to joining Sa Sa he was the chief financial officer of Tom Group, which specialises in publishing and broadcasting. He is also vice chairman of the Hong Kong Retail Management Association.
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