Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>The epicenter of the Asian ETF selloff last week was Japan, recording an outflow of nearly $100B from equity funds taking the net flows back to breakeven for the YTD.</li>
<li>
<a href="https://www.smartkarma.com/entities/seazen" target="_blank" data-smartkarma-citation="entities:14882:1" rel="noopener">Seazen (Formerly Future Land) (1030 HK)</a> and <a href="https://www.smartkarma.com/entities/swire-properties-ltd" target="_blank" data-smartkarma-citation="entities:5775:1" rel="noopener">Swire Properties (1972 HK)</a> had positive announcements while <a href="https://www.smartkarma.com/entities/new-oriental-education-techn" target="_blank" data-smartkarma-citation="entities:32210:1" rel="noopener">New Oriental Education &amp; Techn (9901 HK)</a> and <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> announced earnings.
</li>
<li>
<a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> shares are under pressure as the telco sector goes through a price war in cloud services and investors take profits from high dividend names.
</li>
</ul>


The epicenter of the Asian ETF selloff last week was Japan, recording an outflow of nearly $100B from equity funds taking the net flows back to breakeven for the YTD.

Seazen (Formerly Future Land) (1030 HK) and Swire Properties (1972 HK) had positive announcements while New Oriental Education &amp; Techn (9901 HK) and Yum China Holdings (9987 HK) announced earnings.


China Unicom Hong Kong (762 HK) shares are under pressure as the telco sector goes through a price war in cloud services and investors take profits from high dividend names.



The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 10)

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>We believe Yum China remains the best long-term China catering play. 2Q24 results highlight the resiliency and agility of its business model and management to navigate tough environment.</li>
<li>While cost optimization drove bottom-line beat, we share management’s view that it is not one-off exercise but will strengthen the company’s operation efficiency moat and market leadership.</li>
<li>Macro concerns are well known and fully priced in in our view. Otherwise investors won’t have the opportunity to own the name for low double-digit P/E.</li>
</ul>


We believe Yum China remains the best long-term China catering play. 2Q24 results highlight the resiliency and agility of its business model and management to navigate tough environment.
While cost optimization drove bottom-line beat, we share management’s view that it is not one-off exercise but will strengthen the company’s operation efficiency moat and market leadership.
Macro concerns are well known and fully priced in in our view. Otherwise investors won’t have the opportunity to own the name for low double-digit P/E.


Yum China (9987 HK): The Best Long-Term China Catering Play

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat.</li><li>For 2H24E, we are still very cautious about the demand and so as the level of competition.</li><li>However, thanks to various efforts like Project Fresh Eye, Project Red Eye, rationalizing number of SKUs, more direct sourcing, and rampup of more profitable store formats (e.g. K-coffee and Pizza Hut’s WOW model) etc., we are confident on a turnaround in 4Q24E. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat.For 2H24E, we are still very cautious about the demand and so as the level of competition.However, thanks to various efforts like Project Fresh Eye, Project Red Eye, rationalizing number of SKUs, more direct sourcing, and rampup of more profitable store formats (e.g. K-coffee and Pizza Hut’s WOW model) etc., we are confident on a turnaround in 4Q24E. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Yum China (YUMC US) - The Best-In-Class Costs Management in 2Q24

Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> reported a marginal 1% year-on-year increase in 2Q2024 revenue, driven by new store additions despite a decline in same-store sales.</li>
<li>Despite a challenging business environment, it achieved 8% year-on-year profit growth in Q2 and stabilised margins through sharp cost management and operational efficiency initiatives.</li>
<li>Without a clear visibility in improvement in consumer sentiment and spending, expect the tough operating environment to limit Yum China's revenue and profit growth potential.</li>
</ul>



Yum China Holdings (9987 HK) reported a marginal 1% year-on-year increase in 2Q2024 revenue, driven by new store additions despite a decline in same-store sales.
Despite a challenging business environment, it achieved 8% year-on-year profit growth in Q2 and stabilised margins through sharp cost management and operational efficiency initiatives.
Without a clear visibility in improvement in consumer sentiment and spending, expect the tough operating environment to limit Yum China's revenue and profit growth potential.


Yum China (9987 HK): 2Q 2024 - Market Expansion Can't Mask Macro Woes

<ul>
<li>The company’ share bucked China catering sector’s down trend and rallied 30% in last few weeks.</li>
<li>Its 2Q operating data suggest that its store opening is well on track with healthy SSSG, underpinning strong margin expansion.</li>
<li>We believe that market still underestimates its growth and earnings potential which could beat consensus by wide margin. Interim results to be announced in August will be key catalyst.</li>
</ul>


The company’ share bucked China catering sector’s down trend and rallied 30% in last few weeks.
Its 2Q operating data suggest that its store opening is well on track with healthy SSSG, underpinning strong margin expansion.
We believe that market still underestimates its growth and earnings potential which could beat consensus by wide margin. Interim results to be announced in August will be key catalyst.


DPC Dash (1405 HK): Strong 2Q Data Pointing to Underappreciated Growth and Margin Potential

China

Yum China Holdings, Inc. operates chain restaurants. The Company offers pizza, entrees, pasta, rice dishes, appetizers, soups, vegetables, beverages, and desserts. Yum China Holding conducts its business worldwide.

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Yum China Holdings (YUMC US)

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 10)

Japan had massive outflows in equity ETF's for the week. Property firms Seazen and Swire Properties had positive earnings news. New Oriental and...

David Mudd

Yum China (9987 HK): The Best Long-Term China Catering Play

Cost optimization driving 2Q beat is not one-off actions but long-term strategy with enduring and strategic benefits. Deflationary concerns are...

Eric Chen

Yum China (YUMC US) - The Best-In-Class Costs Management in 2Q24

Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat. For 2H24E, we are still very cautious about the demand and so as...

CMB International

Yum China (9987 HK): 2Q 2024 - Market Expansion Can't Mask Macro Woes

Unless macro economic headwinds ease, the stock - currently trading at the low end of its historical valuation range (14X P/E and 2% dividend...

Devi Subhakesan

DPC Dash (1405 HK): Strong 2Q Data Pointing to Underappreciated Growth and Margin Potential

DPC Dash's strong 2Q operating data indicate healthy growth potential and margin expansion that are underestimated by market. Interim results in...

Eric Chen

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