Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>HK F&amp;B is set to have a reprieve as dine-in services at catering businesses can now remain open from 6 pm-10 pm ( max seating up to 4 people).</li>
<li>We provide a list of 34 names that will benefit from the removal of restrictions ( some with further catalysts down the road as they are exposed to China)</li>
<li>Our favorite pick remains <a href="https://www.smartkarma.com/entities/taste-gourmet-group-ltd" target="_blank" data-smartkarma-citation="entities:27339:1" rel="noopener">Taste Gourmet Group (8371 HK)</a> which we have written about in our insight <a href="https://www.smartkarma.com/insights/taste-gourmet-multibagger-reopening-play" target="_blank" data-smartkarma-citation="insights:67297" rel="noopener">Taste Gourmet: Multibagger Reopening Play</a>.</li>
</ul>


HK F&amp;B is set to have a reprieve as dine-in services at catering businesses can now remain open from 6 pm-10 pm ( max seating up to 4 people).
We provide a list of 34 names that will benefit from the removal of restrictions ( some with further catalysts down the road as they are exposed to China)
Our favorite pick remains Taste Gourmet Group (8371 HK) which we have written about in our insight Taste Gourmet: Multibagger Reopening Play.


A Comprehensive List of Hong Kong F&B Names to Play the Reopening

<ul>
<li>The relaxing of restrictions by Hong Kong makes <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 great reopening play, trading at 8.8x FY22e and 5.6x FY23e. </li>
<li>Despite a challenging environment, the company has executed well, maintaining net margins north of 7-8%, which are far superior to other listed competitors.</li>
<li>With &gt;60% payout ratios, it trades at a dividend yield of 6.7%/11.4% FY22e/FY23e. Since 29% of the market capitalization is cash, we are confident in the dividend payments. </li>
</ul>


The relaxing of restrictions by Hong Kong makes Taste Gourmet Group Ltd (8371 HK) a great reopening play, trading at 8.8x FY22e and 5.6x FY23e. 
Despite a challenging environment, the company has executed well, maintaining net margins north of 7-8%, which are far superior to other listed competitors.
With &gt;60% payout ratios, it trades at a dividend yield of 6.7%/11.4% FY22e/FY23e. Since 29% of the market capitalization is cash, we are confident in the dividend payments. 


Taste Gourmet: Multibagger Reopening Play

<ul>
<li>
<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> represents a great opportunity to capture growth and value.  With 8% net margins, the company outperformed its peers in a depressed environment.</li>
<li>Trading at a 5.8x FY22 PE with 29% of the market capitalization in cash, the company has a significant margin of safety. Reopening could easily result in the stock doubling.</li>
<li>The company paid 0.04 HKD/share of dividend for H1 2022, representing a 9% dividend yield annualized. With seasonally higher earnings, we believe dividends can be higher.</li>
</ul>



Taste Gourmet Group Ltd (8371 HK) represents a great opportunity to capture growth and value.  With 8% net margins, the company outperformed its peers in a depressed environment.
Trading at a 5.8x FY22 PE with 29% of the market capitalization in cash, the company has a significant margin of safety. Reopening could easily result in the stock doubling.
The company paid 0.04 HKD/share of dividend for H1 2022, representing a 9% dividend yield annualized. With seasonally higher earnings, we believe dividends can be higher.


We received a positive profit alert for H1 2022 for <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>, as expected in our last insight, <a href="https://www.smartkarma.com/insights/taste-gourmet-conviction-growing-as-execution-remains-solid" target="_blank" data-smartkarma-citation="insights:57186" rel="noopener">Taste Gourmet: Conviction Growing As Execution Remains Solid</a>,  the numbers based on the profit alert though are below our expectations which we largely believe is due to higher employee and food costs (we will get more clarity on this when the results are fully published on the 12th of November 2021). We calculate the H1 FY22 profits based on the alert released at 24 mn HKD (vs. our expectation of around 27 mn HKD).
We believe that the company is still on track to hit a 60 mn HKD profit number for FY22, putting it at 6.5x FY22 PE. We also believe that the management will adhere to a 50% payout ratio, resulting in a dividend yield of 7.9%. With close to 90 mn HKD of net cash on the balance sheet, the stock trades an even cheaper ex-cash at 4.5x FY22 PE. 
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The only major near-term risk we see is the resurfacing of Covid restrictions on dine-ins.

We received a positive profit alert for H1 2022 for Taste Gourmet Group Ltd (8371 HK), as expected in our last insight, Taste Gourmet: Conviction Growing As Execution Remains Solid,  the numbers based on the profit alert though are below our expectations which we largely believe is due to higher employee and food costs (we will get more clarity on this when the results are fully published on the 12th of November 2021). We calculate the H1 FY22 profits based on the alert released at 24 mn HKD (vs. our expectation of around 27 mn HKD).
We believe that the company is still on track to hit a 60 mn HKD profit number for FY22, putting it at 6.5x FY22 PE. We also believe that the management will adhere to a 50% payout ratio, resulting in a dividend yield of 7.9%. With close to 90 mn HKD of net cash on the balance sheet, the stock trades an even cheaper ex-cash at 4.5x FY22 PE. 

The only major near-term risk we see is the resurfacing of Covid restrictions on dine-ins. 

Taste Gourmet: Positive Profit Alert for H1 2022

We believe that <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> can deliver a stellar Q2 FY22/H1 FY22  if operations remain uninterrupted in Hong Kong. 
<ul>
<li>In Q1 FY22, the company delivered its highest quarterly revenue of 145 mn HKD ( Vs. its last highest of 103 mn in Q3 FY21), despite operation being interrupted for over 1.5 weeks in April. We believe that revenue can average over 160 mn HKD in Q2 FY22.</li>
<li>Profit margins for Q1 FY22 averaged 7.6% due to COVID interrupting operations in April, and the company also took the opportunity to refurbish 2 of its existing restaurants and rebrand its Vietnamese La'Taste brand. With its operations uninterrupted in Q2 FY22 net margins can trend up to 10% on the revenue of 160 mn HKD. </li>
</ul>
We expect the company to deliver a profit alert for H1 FY2022. We believe that <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>  can deliver revenue above 300 mn HKD ( FY21 revenue 379 mn HKD ) and a profit of 28 mn HKD ( equivalent to FY21 profit) for H1 FY22.
The stock trades at an appealing multiple of 6.9x FY22 and 5.7x FY23. With increasing cash flows, we believe the company can increase its dividend payout ratio to 50%. We believe at this payout ratio, the dividend yield for FY22/FY23 equates to 7.2%/9.1%.

We believe that Taste Gourmet Group Ltd (8371 HK) can deliver a stellar Q2 FY22/H1 FY22  if operations remain uninterrupted in Hong Kong. 

In Q1 FY22, the company delivered its highest quarterly revenue of 145 mn HKD ( Vs. its last highest of 103 mn in Q3 FY21), despite operation being interrupted for over 1.5 weeks in April. We believe that revenue can average over 160 mn HKD in Q2 FY22.
Profit margins for Q1 FY22 averaged 7.6% due to COVID interrupting operations in April, and the company also took the opportunity to refurbish 2 of its existing restaurants and rebrand its Vietnamese La'Taste brand. With its operations uninterrupted in Q2 FY22 net margins can trend up to 10% on the revenue of 160 mn HKD. 

We expect the company to deliver a profit alert for H1 FY2022. We believe that Taste Gourmet Group Ltd (8371 HK)  can deliver revenue above 300 mn HKD ( FY21 revenue 379 mn HKD ) and a profit of 28 mn HKD ( equivalent to FY21 profit) for H1 FY22.
The stock trades at an appealing multiple of 6.9x FY22 and 5.7x FY23. With increasing cash flows, we believe the company can increase its dividend payout ratio to 50%. We believe at this payout ratio, the dividend yield for FY22/FY23 equates to 7.2%/9.1%.

Taste Gourmet: Conviction Growing As Execution Remains Solid

Hong Kong

Taste Gourmet Group is a Hong Kong-based restaurant group that operates full-service restaurants offering a variety of cuisines under a portfolio of brands. The company provides Japanese, Chinese, Western, and Vietnamese food, as well as desserts and kiosks, across over 60 restaurants under 23 brands. It is headquartered in Hong Kong and was founded in 2007.

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Taste Gourmet Group (8371 HK)

A Comprehensive List of Hong Kong F&B Names to Play the Reopening

We list 34 names that will benefit from the easing of dine-in restrictions in Hong Kong. Our favorite pick remains Taste Gourmet Group (8371 HK).

Sameer Taneja

Taste Gourmet: Multibagger Reopening Play

The relaxing of restrictions by Hong Kong makes Taste Gourmet Group Ltd (8371 HK) a great reopening play, trading at 8.8x FY22e/5.6x FY23e PE and a...

Sameer Taneja

Taste Gourmet: Great Reopening Play

Taste Gourmet is a restaurant operator trading at 5.8x FY22 PE (4x PE ex-cash) with 29% of the market capitalization cash and a 9% dividend yield....

Sameer Taneja

Taste Gourmet: Positive Profit Alert for H1 2022

Taste Gourmet is a small restaurant operator in Hong Kong trading at 6.5x FY22 PE with a 7.9% dividend yield and around 24% of its market...

Sameer Taneja

Taste Gourmet: Conviction Growing As Execution Remains Solid

Taste Gourmet trades at a multiple of 6.9x FY22 and 5.7x FY23. The company can increase its dividend payout ratio to 50%, implying a dividend yield...

Sameer Taneja

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