Core Viewpoint - NWDS China has shown signs of recovery in same store sales growth (SSSG) after years of decline, driven by increased purchase volumes in key categories and external factors such as RMB depreciation [1][2] Group 1: Company Overview - NWDS China operates 42 department stores across 22 cities and has over 20 years of operating history, with 7 self-owned properties [1] - Revenue distribution in 1H17 was 46.1% from Northern China, 33.5% from Eastern China, and 20.4% from Central Western regions [1] Group 2: Sales Performance - SSSG was flat year on year in 1H17, marking a turnaround from negative growth since FY14, attributed to strong performance in cosmetics, sportswear, and jewelry [1] - Management noted that SSSG trends continued positively into January and February of the current year, with similar performance reported by other department stores [1] Group 3: Revenue Transformation - NWDS has diversified its revenue streams, increasing direct sales (including its own brand LOL and n+Natural Taste) by 24% over the past three years, which accounted for 31% of total revenue in 1H17 [2] - Rental income, primarily from restaurants, rose by 25% over the same period, contributing 19% to total revenue in 1H17 [2] - The share of concessionaire sales decreased from 66% in FY13 to 50% in 1H17, indicating a shift towards more direct sales and experiential retailing [2] Group 4: Valuation Insights - NWDS is currently trading at an annualized P/E ratio of 11X for FY17 and a distressed P/B valuation of 0.35x based on 1H17 results, with HK$640 million in net cash [3] - The department store sector is showing improvement in SSSG, suggesting potential investment opportunities, especially if self-owned properties are disposed of to unlock value [3]