Jusco healthy, wealthy and wise, but too small

Jusco is a department store company that no one seems interested in. The management ap pears steady.

The store operator has managed to weather Hong Kong's worst retail recession in 10 years in good shape. A consistent record of rising sales and operating profits is given in the group company accounts from 1991 to 1995. The group balance sheet looks clean and healthy. Even the Japanese parent is doing well, with a 41 per cent rise in pre-tax profits for the year to February at 57.8 billion yen (about HK$4.1 billion). Jusco Stores (Hong Kong) appears well placed to benefit from the forecast upturn in the retail sector over the next 18 months. Yet only two brokerages put in profit forecasts on the company to The Estimate Directory.

Kerry Securities follows the group because its parent is involved in investment in China and Nomura follows Jusco because it is Japanese.

The problem is Jusco is just too small. With a market capitalisation of less than $429 million and an average daily turnover of 142,400 shares a day in 1996, according to Bloomberg, big institutional investors cannot take the group seriously as an investment. But this should not stop retail investors.

Since listing, the shares have not done so well. While the Hang Seng Index has risen 5 per cent since February 1994, Jusco fell almost 2 per cent. On the year-to-date Jusco has faired better. The share is up 32 per cent, against 11.8 per cent on the index.

Attributable profit was up 16 per cent in 1995 at $57 million on a turnover of $1.58 billion, up 15 per cent. Earnings per share were up 16 per cent to 22 cents.