Why analysts think that Li & Fung's recent release was 'deceptive'

It is masking the real big news.

According to Barclays, Li & Fung issued a press release on Monday 6 January that mentioned a vendor development programme that the group will pursue as part of its next three-year plan. 

"But what we found most interesting in the release was the first sentence, which said the group had a “strong finish to the year” (2013) and would achieve operating profits in line with its earlier guidance of reverting to 2011 profit levels," Barclays said.

Here's more from Barclays:

We estimate this implies almost 10% upside to the Bloomberg consensus estimate for 2013 core operating profit of US$810m and more than 10% upside to the consensus EPS estimate of US$0.086.

That, combined with the heavy net short position built into the counter, suggests there could be a significant relief rally ahead.

We upgrade the stock to Overweight on the back of this catalyst, which we consider to be by far the most significant positive news flow to come from the business and guidance to come from the management in the past two years.

We raise our price target to HK$13 from HK$12.3 as we look out to 2014 multiples based on 18.5x P/E and, combined with the c5% dividend yield pick-up over 12 months, we see more than 25% potential upside to yesterday’s closing price.