Topsports Earnings: Stable Outlook and Cheap Valuation

Narrow-moat Topsports’ second-half fiscal 2024 (ending February) earnings were in line with our estimates. However, management's guidance for fiscal 2025 was somewhat ambiguous, indicating a wide range of positive revenue growth. We made minor updates to our model but kept our fair value estimate unchanged at HKD 7.50 per share. We expect a five-year revenue compound annual growth rate of 7% for Topsports. We think shares are undervalued currently, trading at a modest 13 times fiscal 2025 earnings, 7% dividend yield, and 25% discount to our valuation.