[ET Net News Agency, 7 February 2020] Morgan Stanley lifted its target price for Sun
Art Retail Group (06808) to HK$8.7 from HK$8.6 and maintained its "equal-weight" rating.
The research house thinks the market is pricing in a turnaround in SSSG for 4Q 2019 and
strong earnings growth for 2H 2019. Morgan estimated Sun Art's SSSG was -1.2% for 3Q 2019
and +1.2% for 4Q 2019.
Morgan thinks a stable SSSG in 2H 2019 helped the earnings, but essentially the key
earnings drivers were (1) Auchan loss reduction, (2) lack of extra expenses related to the
Suning partnership, (3) savings from social security expenses, and (4) constant increases
in rental income.
Morgan expects 14% net income growth for 2019, implying 35% growth for 2H. To factor in
IFRS 16, the research house estimated the restated net income for 2018 to be Rmb2,435mn,
based on the restatement for 1H 2018. (KL)