Bank of America Securities: Downgrade TOPSPORTS (06110) to "Neutral" with a target price lowered to 3 Hong Kong dollars.

Bank of America Securities released a research report stating that they are downgrading their rating on TOPSPORTS (06110) from "buy" to "neutral" primarily due to continued weak demand and rising discount risks. They are also lowering their earnings forecasts for 2025 to 2027 by 25% to 28% to reflect lower revenue and gross profit forecasts, and reducing their target price from HK$4.3 to HK$3. The company has issued a profit warning for the first half of the 2025 fiscal year ending in August, indicating that net profit may decline by 35% year-on-year due to deleveraging operations and lower gross profit margins. The bank stated that although the profit outlook for TOPSPORTS is uncertain, the company still maintains a dividend payout ratio of over 100%, equivalent to a dividend yield of 9%. With strong support from healthy free cash flows and a robust balance sheet, a dividend yield of 9% still provides some support. Bank of America Securities noted that TOPSPORTS has not ruled out further declines in traffic, and has become more conservative in their store expansion plans for the second half of the year, implying that revenue for the second half may decline further compared to the first half.