Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

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Equity Bottom-up Research

Equity Bottom-Up

This insight focuses on a small "gem" listed in HK, <a href="https://www.smartkarma.com/entities/taste-gourmet-group-ltd" target="_blank" data-smartkarma-citation="entities:27339:1" rel="noopener">Taste Gourmet Group Ltd (8371 HK)</a> a restaurant operator with all its revenue currently in HK.  While it is small with a 315 mn HKD market cap, for investors who can stomach the liquidity this provides the potential to have  a  4-5(x) return over the next 4-5 years. The key investment highlights for the company are :
1) It has a strong and efficient pipeline of restaurants with 10+% net margins representing the highest in its peer group in HK and China.  I expect its pipeline of restaurants to expand by 20-25% at least per annum.
2) Being small it is undiscovered and currently trades at a 6x FY20 fwd P-E ( March Yr End ). I forecast 25-30% CAGR growth in earnings at least over the next five years, given its pipeline of restaurants and strong balance sheet.
3) With 23% of the market cap in net cash ( around 70 mn HKD ), the balance sheet is strong and the company is in a position to expand its restaurant count by 25% CAGR. It also buys back stock on share price weakness and distributes 55% of its net profits as dividends. Currently the dividend yield is around 6.5% based on FY20 earnings.
I think this stock could easily trade at a substantial premium to its current multiple of 6x.  A 15x multiple for a company growing 25-30% CAGR would imply this company could be a 4 HKD/share stock in 4-5 years. The current stock price is 0.81 HKD/share.

This insight focuses on a small "gem" listed in HK, Taste Gourmet Group Ltd (8371 HK) a restaurant operator with all its revenue currently in HK.  While it is small with a 315 mn HKD market cap, for investors who can stomach the liquidity this provides the potential to have  a  4-5(x) return over the next 4-5 years. The key investment highlights for the company are :
1) It has a strong and efficient pipeline of restaurants with 10+% net margins representing the highest in its peer group in HK and China.  I expect its pipeline of restaurants to expand by 20-25% at least per annum.
2) Being small it is undiscovered and currently trades at a 6x FY20 fwd P-E ( March Yr End ). I forecast 25-30% CAGR growth in earnings at least over the next five years, given its pipeline of restaurants and strong balance sheet.
3) With 23% of the market cap in net cash ( around 70 mn HKD ), the balance sheet is strong and the company is in a position to expand its restaurant count by 25% CAGR. It also buys back stock on share price weakness and distributes 55% of its net profits as dividends. Currently the dividend yield is around 6.5% based on FY20 earnings.
I think this stock could easily trade at a substantial premium to its current multiple of 6x.  A 15x multiple for a company growing 25-30% CAGR would imply this company could be a 4 HKD/share stock in 4-5 years. The current stock price is 0.81 HKD/share.

Hong Kong

Taste Gourmet Group Limited operates as a holding company. The Company, through its subsidiaries, manages a chain of restaurants. Taste Gourmet Group serves clients worldwide.

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Taste Gourmet (8371 HK)

Taste Gourmet - Small Is Beautiful

This insight focuses on a small "gem" listed in HK, Taste Gourmet Group Ltd (8371 HK) a restaurant operator with all its revenue currently in HK. ...

Sameer Taneja

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