Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Equity Bottom-Up

Perfect Medical Health / Equity Bottom-Up

<ul>
<li>Perfect Shape's interim results are largely as expected;</li>
<li>The business still maintains a robust financial position throughout the pandemic;</li>
<li>While the recovery is hopeful but still uncertain, the management is looking to take advantage of any downturn to widen the competitive gap.</li>
</ul>


Perfect Shape's interim results are largely as expected;
The business still maintains a robust financial position throughout the pandemic;
While the recovery is hopeful but still uncertain, the management is looking to take advantage of any downturn to widen the competitive gap.


Perfect Shape: Our Takeaways From H1 Results

<ul class="">
<li>No company is perfect from an investing perspective, with Perfect Shape being no exception;</li>
<li>Meanwhile, there is a lot that long-term, quality-focused investors like us can like about the stock;</li>
<li>In particular, skillful capital allocation, promising growth prospects, a track record of outperforming competitors, and an attractive valuation can together lead to a long-term alpha opportunity with a margin of safety.</li>
</ul>


No company is perfect from an investing perspective, with Perfect Shape being no exception;
Meanwhile, there is a lot that long-term, quality-focused investors like us can like about the stock;
In particular, skillful capital allocation, promising growth prospects, a track record of outperforming competitors, and an attractive valuation can together lead to a long-term alpha opportunity with a margin of safety.


Perfect Shape Is Not Perfect But Here Is What We Like About It

Thematic (Sector/Industry)

<ul>
<li>Founder-led businesses are supposed to receive more appreciation among investors;</li>
<li>It would be intriguing to explore how Chinese founders and business owners pay themselves, as executive compensation is a significant part of corporate governance, a common weakness among most Chinese public companies;</li>
<li>We examine a pool of selected value-generative, founder-led, Chinese businesses across industries, and market caps to demonstrate the similarity and any dissimilarity.</li>
</ul>


Founder-led businesses are supposed to receive more appreciation among investors;
It would be intriguing to explore how Chinese founders and business owners pay themselves, as executive compensation is a significant part of corporate governance, a common weakness among most Chinese public companies;
We examine a pool of selected value-generative, founder-led, Chinese businesses across industries, and market caps to demonstrate the similarity and any dissimilarity.


<ul>
<li>The stock of Water Oasis is hitting a mid-single-digit P/E and a high-teens FCF yield;</li>
<li>But buying cheap does not always produce a sizable return for owners;</li>
<li>We would like to examine the business fundamentals through a few factors that help identify a value trap.</li>
</ul>


The stock of Water Oasis is hitting a mid-single-digit P/E and a high-teens FCF yield;
But buying cheap does not always produce a sizable return for owners;
We would like to examine the business fundamentals through a few factors that help identify a value trap.


<ul>
<li>Beaten-down industries often offer rare opportunities for investors to buy quality businesses at attractive prices;</li>
<li>We feel that the valuations of a few Hong Kong-based beauty service providers seem at least reasonable;</li>
<li>Then the question would be whether the "cheap" business is truly of high quality (i.e., a well-moated compounder);</li>
<li>As always, we advocate focusing solely on winners that are persistently profitable, high-return, and cash-rich;</li>
<li>We took a look at three such players in this space and concluded with only one of them worth an "investable" status.</li>
</ul>


Beaten-down industries often offer rare opportunities for investors to buy quality businesses at attractive prices;
We feel that the valuations of a few Hong Kong-based beauty service providers seem at least reasonable;
Then the question would be whether the "cheap" business is truly of high quality (i.e., a well-moated compounder);
As always, we advocate focusing solely on winners that are persistently profitable, high-return, and cash-rich;
We took a look at three such players in this space and concluded with only one of them worth an "investable" status.


A Look at Hong Kong's Beaten-Down Beauty Service Stocks

Hong Kong

EC Healthcare operates as a non-hospital medical service provider. The Company principally engages in the provision of medical, aesthetic medical, beauty and wellness services, and sale of skincare, healthcare and beauty products. EC Healthcare conducts businesses in Hong Kong, Macau, and Mainland China.

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EC Healthcare (2138 HK)

Perfect Shape: Our Takeaways From H1 Results

While the recovery is hopeful but still uncertain, the management is looking to take advantage of any downturn to widen the competitive gap.

Steven Chen

Perfect Shape Is Not Perfect But Here Is What We Like About It

We think that Perfect Shape offers a long-term alpha opportunity with a margin of safety at the current level, even after a nearly 30% rally in the...

Steven Chen

How Chinese Founders Pay Themselves

Take a look at how Chinese founders and business owners pay themselves and gauge the soundness of corporate governance among founder-operated and...

Steven Chen

Water Oasis: Deep Value or Value Trap?

Buying cheap does not necessarily produce sizable returns. We employ our value-trap framework to assess the risk profile of Water Oasis, a...

Steven Chen

A Look at Hong Kong's Beaten-Down Beauty Service Stocks

The Hong Kong beauty service industry is among the hardest-hit throughout the pandemic. We recommend focusing solely on the highest-quality and...

Steven Chen

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