Here are 3 important things on Sa Sa's game plan

More stores set to open.

According to Maybank Kim Eng, Sa Sa intends to (i) open more than 20 new boutique stores in China in FY3/14F to boost cost effectiveness and productivity; ii) open a new lifestyle concept store in Causeway Bay in late Jul 2013 to provide an enhanced shopping experience to customers, including services such as a nail spa, makeup and styling, facial and body treatment and a hair salon; and iii) add 42 new stores to reach a store count of 291 by year-end.

Here's more:

Despite these initiatives, the popularity of the new format of stores in China is in question and we expect another loss-making year for China in FY3/14. Further, we see an imminent threat of rising costs due to a shortage of quality retail space and labour.

We also believe the decelerating number of PRC visitors to Hong Kong (up 19.4% YoY in 4M13 vs 24.2% YoY in 2012) as a negative for SaSa, because mainland tourists contribute to 70% of its sales in HK.

Finally, we share management’s concern that the weak Yen will result in more purchases of cosmetics and skincare products in Japan.