Buy Le Saunda On Any Post-Results Profit-Taking

Le Saunda (0738) shares have surged 18.4% month-to-date, I would be looking to buy into post-results profit-taking, if any, though any purchase wouldn't be outsized due to general principle of cautiousness on small caps.

The footwear retailer's net profit for financial year ending February decreased 20% on-year to CNY59.7 million, on back of 17% drop in revenue to CNY1.13 billion. Attraction in shares mainly comes from dividends with a special dividend of 4.4 HK cents on top of a final dividend of 3.6 HK cents. This, together with interim dividend of 3.3 HK cents and interim special dividend of 1.7 HK cents, bringing full-year dividend payout of 13 HK cents, more than EPS of 8.45 HK cents, and representing a mouth-watering yield of 9.6%. 

Supporting such generous dividend payout is company's cash pile of CNY603 million, which works out to be approximately HK$1.05 per share. In other words, 78% of Le Saunda's market cap is backed by cash, stripping out which, it's P/E ratio is less than 3 times.

The bottom-line is this: Le Saunda shares at Monday's close of HK$1.35 should be well supported by its strong dividend yield, while upside hinges whether its retail operations can improve, which is less certain but worth a punt.