According to the HSBC Global Research and Development Report, the revenue of Lukfook Group (00590)'s Hong Kong and Macau business in the mid-2024 fiscal year has recovered to 77% of the 2019 fiscal year level, exceeding the company's expectations. The bank expects revenue in Hong Kong and Macau to return to 125% of fiscal year 2019 levels in fiscal year 2024.
According to the bank, Lukfook recently plans to acquire 50.49% of the shares of Hong Kong Resources Holdings (02882) and increase its shareholding in the associated company 3D Gold to 70% in disguise. However, based on losses from 3D Gold, capital allocation may limit shareholder returns, which will still affect its valuation.
The bank lowered the valuation of Lukfook Group's price-earnings ratio from 7.6 times to 7.3 times. Due to an increase in profit forecasts, the target price was raised 7% from HK$20.4 to HK$21.9, reflecting a 7.9% increase in stock prices and maintaining the “hold” rating.