Topsports Earnings: Lowering Forecasts, Reducing Fair Value to HKD 7.20 Amid Trading Down

Narrow-moat Topsports reported a disappointing 5% decline in sales for the fiscal first quarter ended May 2024. Management said that sales in June are looking at a similar level of decline, suggesting that our previous forecast for the year was too optimistic. As a result, we take our forecast down a notch and lower our fair value estimate to HKD 7.20 per share from HKD 7.50. Despite this, we still view Topsports’ shares as undervalued, trading at a modest 12 times multiple against our fiscal 2025 earnings estimate, with 8% dividend yield, and at a 40% discount to our valuation.