HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lung-fung-group-holdings-limited" target="_blank" data-smartkarma-citation="entities:46142:1" rel="noopener">Lung Fung Group (2290 HK)</a> is still 37.3% below its IPO price, despite a sharp rebound following its better-than-expected FY26 results. </li>
<li>Its same-store sales have consistently outperformed, and the start for 1Q FY27 appears encouraging. With an ROE of 72.7% for FY27, its 1.9x P/B is undemanding. </li>
<li>At a 4.8x FY27F PER and a 12.6% dividend yield, the stock is extremely cheap and trades at a steep discount to its HK-listed peers. </li>
</ul>



Lung Fung Group (2290 HK) is still 37.3% below its IPO price, despite a sharp rebound following its better-than-expected FY26 results. 
Its same-store sales have consistently outperformed, and the start for 1Q FY27 appears encouraging. With an ROE of 72.7% for FY27, its 1.9x P/B is undemanding. 
At a 4.8x FY27F PER and a 12.6% dividend yield, the stock is extremely cheap and trades at a steep discount to its HK-listed peers. 


Lung Fung Group (2290 HK): Still Looks Undervalued

Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

<ul>
<li>Cosmos Pharmaceutical Corp (a drug store chain operator that sells mostly food) is scaling faster than peers, opening stores organically while maintaining unusually stable per-store operating profit.</li>
<li>Its food-led discount model creates high traffic, purchasing leverage, and a long runway in Japan’s fragmented packaged-food market.</li>
<li>Slow, secular decline in RoE is inevitable, but the market is discounting an unrealistically fast pace of decay. Cosmos still has a very long growth runway.</li>
</ul>


Cosmos Pharmaceutical Corp (a drug store chain operator that sells mostly food) is scaling faster than peers, opening stores organically while maintaining unusually stable per-store operating profit.
Its food-led discount model creates high traffic, purchasing leverage, and a long runway in Japan’s fragmented packaged-food market.
Slow, secular decline in RoE is inevitable, but the market is discounting an unrealistically fast pace of decay. Cosmos still has a very long growth runway.


Cosmos (3349): Still Miles of Growth Runway

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lung-fung-group-holdings-limited" target="_blank" data-smartkarma-citation="entities:46142:1" rel="noopener">Lung Fung Group (2290 HK)</a>, a leading Hong Kong-based chain retail store of beauty, health and pharmaceutical products, is seeking to raise HK$672m net proceeds.</li>
<li>When compared with <a href="https://www.smartkarma.com/entities/sa-sa-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa (178 HK)</a>, it has higher operating and net margins, and also better net profit for FY27.  </li>
<li>At the high-end of IPO price range (HK$6.38), it trades on 9.2x FY27 PER. At par to Sa Sa's 12x, there will be a 29% upside potential to HK$8.25. </li>
</ul>



Lung Fung Group (2290 HK), a leading Hong Kong-based chain retail store of beauty, health and pharmaceutical products, is seeking to raise HK$672m net proceeds.
When compared with Sa Sa (178 HK), it has higher operating and net margins, and also better net profit for FY27.  
At the high-end of IPO price range (HK$6.38), it trades on 9.2x FY27 PER. At par to Sa Sa's 12x, there will be a 29% upside potential to HK$8.25. 


Lung Fung Group (2290 HK) IPO: Too Cheap to Ignore

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>A month ago I wrote <a href="https://www.smartkarma.com/insights/japan-activism-m-a-closing-in-on-the-tsuruha-partial-tender-likely-needs-to-be-higher" target="_blank" data-smartkarma-citation="insights:206132" rel="noopener">[Japan Activism/M&amp;A] - Closing In On the Tsuruha Partial Tender - Likely Needs To Be Higher</a>. Now we are &lt;2wks to the deal.  </li>
<li>At the time, I said the Partial Tender Offer Price needed to be higher than the mooted ¥2,280. <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> shares are up 10.0% in that month. </li>
<li>The three largest peers are -2.0% on average in that period. The average of 8 peers is +0.5%. I still expect the partial offer price needs to be near ¥3,100</li>
</ul>


A month ago I wrote [Japan Activism/M&amp;A] - Closing In On the Tsuruha Partial Tender - Likely Needs To Be Higher. Now we are &lt;2wks to the deal.  
At the time, I said the Partial Tender Offer Price needed to be higher than the mooted ¥2,280. Tsuruha Holdings (3391 JP) shares are up 10.0% in that month. 
The three largest peers are -2.0% on average in that period. The average of 8 peers is +0.5%. I still expect the partial offer price needs to be near ¥3,100


[Japan Activism/M&A] Thinking About the Partial Tender Trade Coming in Dec25

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<ul>
<li>ACT's bid for Seven &amp; I has been withdrawn and Seven will be better off long-term because of it – although we detail here how competitors are catching up fast.</li>
<li>Once York HD has been split off, the company can at last focus on its crucial local CVS operation: Japan makes up 25% of revenues but almost 50% of profits.</li>
<li>The potential is real and we are bullish on the long-term value but we would have been more bullish if the former CEO Ryuichi Isaka was still on board.</li>
</ul>


ACT's bid for Seven &amp; I has been withdrawn and Seven will be better off long-term because of it – although we detail here how competitors are catching up fast.
Once York HD has been split off, the company can at last focus on its crucial local CVS operation: Japan makes up 25% of revenues but almost 50% of profits.
The potential is real and we are bullish on the long-term value but we would have been more bullish if the former CEO Ryuichi Isaka was still on board.


The Final ACT Comedy of Errors Opens the Way for Real Value to Emerge at Seven & I

Japan

COSMOS Pharmaceutical Corporation operates drug stores based in Kyushu. The Company sells daily necessities such as drug medicines, foodstuffs, and alcoholic beverages.

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Cosmos Pharmaceutical (3349 JP)

Lung Fung Group (2290 HK): Still Looks Undervalued

Lung Fung announced that its retail sales revenue increased 21.2% in 1Q FY27, while same-store sales grew 10.3%. This is solid momentum, suggesting...

Osbert Tang, CFA

Cosmos (3349): Still Miles of Growth Runway

The market is discounting a rapid decay, but we still see another decade of above average growth and profitability. Margins are far more...

Michael Allen

Lung Fung Group (2290 HK) IPO: Too Cheap to Ignore

Lung Fung Group seeks to raise HK$672m in IPO, showing higher margins and profit compared to Sa Sa, with potential 29% upside at IPO price range.

Osbert Tang, CFA

[Japan Activism/M&A] Thinking About the Partial Tender Trade Coming in Dec25

Tsuruha and Welcia getting smacked late this AM and early PM - down 7% just now. This looks like an unwind of pre-positioned longs for the M _ _ _...

Travis Lundy

The Final ACT Comedy of Errors Opens the Way for Real Value to Emerge at Seven & I

ACT's bid for Seven & I withdrawn, company to focus on crucial CVS operation in Japan for long-term growth, potential vast but more bullish if...

Michael Causton

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52-week Range

Market Cap (USDm)

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Lung Fung Group (2290 HK): Still Looks Undervalued

Lung Fung announced that its retail sales revenue increased 21.2% in 1Q FY27, while same-store sales grew 10.3%. This is solid momentum, suggesting...

Osbert Tang, CFA

Cosmos (3349): Still Miles of Growth Runway

The market is discounting a rapid decay, but we still see another decade of above average growth and profitability. Margins are far more...

Michael Allen

Lung Fung Group (2290 HK) IPO: Too Cheap to Ignore

​Lung Fung Group seeks to raise HK$672m in IPO, showing higher margins and profit compared to Sa Sa, with potential 29% upside at IPO price range.

Osbert Tang, CFA

[Japan Activism/M&A] Thinking About the Partial Tender Trade Coming in Dec25

Tsuruha and Welcia getting smacked late this AM and early PM - down 7% just now. This looks like an unwind of pre-positioned longs for the M _ _ _...

Travis Lundy

The Final ACT Comedy of Errors Opens the Way for Real Value to Emerge at Seven & I

​ACT's bid for Seven & I withdrawn, company to focus on crucial CVS operation in Japan for long-term growth, potential vast but more bullish if...

Michael Causton

Lung Fung Group seeks to raise HK$672m in IPO, showing higher margins and profit compared to Sa Sa, with potential 29% upside at IPO price range.

ACT's bid for Seven & I withdrawn, company to focus on crucial CVS operation in Japan for long-term growth, potential vast but more bullish if...