Category

Consumer Sector

Brief Consumer: New Oriental (EDU): Stock Up 120% in 2019, But Still 23% Upside Due to Excellent Q2 and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. New Oriental (EDU): Stock Up 120% in 2019, But Still 23% Upside Due to Excellent Q2

1. New Oriental (EDU): Stock Up 120% in 2019, But Still 23% Upside Due to Excellent Q2

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  • EDU’s stock price had risen more than 120% in 2019.
  • The growth rate of both students and revenues accelerated in 2Q2020 (ended November 2019).
  • The operating margin turned to 3% in 2Q2020 versus -5% in 2Q2019.
  • The classroom-based business grew more rapidly than the online business and EDU has been utilizing learning centers more efficiently.
  • We believe, in fiscal 2020 (ended May 2020), total revenues will grow 29% and the operating margin will improve to 14% versus 10% in F2019.
  • The P/E band suggests an upside of 23%.

Our previous coverage on New Oriental:

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Brief Consumer: Central Retail Corp Trading – Robins Trading Is Not a Good Look but Passive Buying Should Help and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Central Retail Corp Trading – Robins Trading Is Not a Good Look but Passive Buying Should Help
  2. Holdco Analysis -Heineken Holding: NAV Discount Breaking Out to a Four-Year High
  3. Central Retail IPO: Trading Debut, Valuation Scenario Analysis
  4. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place
  5. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic

1. Central Retail Corp Trading – Robins Trading Is Not a Good Look but Passive Buying Should Help

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Central Retail (CRC TB) raised about US$2.32bn at THB42 per share, just above the mid point of its IPO price range. We have covered the IPO in our previous two notes:

In this insight, we will look at the IPO deal dynamics and updated valuation.

2. Holdco Analysis -Heineken Holding: NAV Discount Breaking Out to a Four-Year High

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  • Smartkarma recently added a new company/holdco to its list of holdcos under the incredibly useful Holdco Monitor tool.
  • The latest addition to the tool is the European beer giant Heineken Holding Nv (HEIO NA) and its listed subsidiary Heineken NV (HEIA NA).
  • Below, we take a look at the two companies and evaluate the current holdco discount against different situations in Heineken’s history.

3. Central Retail IPO: Trading Debut, Valuation Scenario Analysis

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Central Retail (CRC TB), the retail arm of Central Group, is the leading multi-format, multi-category retailing platform in Thailand, Italy and Vietnam. Central Retail will commence trading on Thursday, 20 February. Central Retail set the offer price at THB42.00 per share, which is around the mid-point of the indicative price range of THB40-43 per share.

In our valuation note, we grudgingly noted that we would participate at most at the low-end of the IPO price range due to an undemanding rating. However, in a follow-on note, we stated that recent events have tipped the balance in favour of giving the IPO a pass. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is unattractive.

4. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place

  • XTep has followed Anta Sports Products (2020 HK) lead of 17th February and finally updated investors on the situation they are facing relating to the coronavirus disease 2019 (COVID-19) outbreak in China.
  • We examine the implications of the earnings outlook and timing. 
  • We question if the latest release should change our stance on the company.

5. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic

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  • LK has lost office consumers, as very few employees are in their offices.
  • LK also lost resident consumers, as delivery men cannot enter communities.
  • We believe LK can hardly survive the epidemic.

Our previous coverage on Luckin Coffee:

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Brief Consumer: Page Industries (PAG IN) and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Page Industries (PAG IN)
  2. Yum China (YUMC): Still Yummy?
  3. L Brands: Sale of Victoria’s Secret Helps Draw Attention to Bath & Body’s Success
  4. Midea Consumer Appliances: Overseas Expansion Eases Real Estate Driven Weak Domestic Market
  5. Mobile World Investment (MWG VN) – From Mobile Phones to Groceries

1. Page Industries (PAG IN)

Disappointments

We argue that the rich valuations enjoyed by Page Industries (PAG IN) are not recession-proof as once assumed by many. Even products like Innerwear are subject to headwinds when the broader economic environment and consumer sentiment turns down.  

Volume recovery remains the key for PAG IN. The investments made by PAG IN in technology and sales may not yield the desired results as the operating environment has changed compared to the previous slow down.  Trading at ~52x FY2021 consensus EPS estimates the room for further disappointments from PAG IN remains. 

2. Yum China (YUMC): Still Yummy?

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On the last quarterly earnings, Yum China Holdings, Inc (YUMC US) management stated that they have successfully fended off the inflated chicken raw material price as they have around 300 chicken suppliers in China and by launching innovative products that use a less premium part of a chicken.

The Novel Coronavirus outbreak has caused significant disruption to the business, confirmed by the management that more than 30% of the total number of restaurants were closed and the outlets that remained open are significantly impacted by travel restriction, suspended festivities and shortened operating hours as people do not go out as much. 

Despite the Coronavirus crisis, the company’s share price has not been that depressed compared to the others such as Xiabuxiabu Catering Mgt Chn Hldgs (520 HK) . Therefore it is the right time to short-sell/reduce holdings in Yum China with potential earnings drop of between 39 to 49%

3. L Brands: Sale of Victoria’s Secret Helps Draw Attention to Bath & Body’s Success

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It was reported by several news media outlets that the private equity firm Sycamore Partners Management LP has been in talks with L Brands Inc (LB US) regarding the purchase of the latter’s iconic lingerie brand Victoria’s Secret (VS). Media reports suggest that it is almost a done deal and an announcement can be expected as early as tomorrow, 18th February 2020. In addition to acquiring VS, Sycamore Partners Management LP is also weighing a private investment in public equity deal (PIPE) to help L Brands reduce its debt burden.

4. Midea Consumer Appliances: Overseas Expansion Eases Real Estate Driven Weak Domestic Market

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This is the SECOND of a series of reports on Midea Corp. in which we will be focusing on the company’s Consumer Appliances segment. Midea generates around 43% of its revenue from consumer appliances and the company is either the market leader or the second in China for a majority of consumer appliance product categories. Due to the slowdown in China’s real estate market, which in turn reduces the demand for consumer appliances, we expect a slow-down in growth for Midea’s consumer appliance segment over the next couple of years compared to its historical growth rates. That being said, we expect growth in overseas demand due to increasing disposable income, busier lifestyles and improved living conditions along with product upgrades. Midea has been expanding its presence into countries which have lower household appliance ownership, thus presents the company with high potential to grow its topline. In addition, the company’s acquisition of Toshiba and other brands have enabled the company to price these products higher compared to its own Midea branded appliances. The consumer appliances revenue has partially grown on the back of increase in average selling prices driven by acquisition of premium consumer appliance brands over the years. We believe, the expansion into countries with lower household appliance penetration alongside premium-priced products will help the company grow its Consumer Appliance’s earnings.

On the other hand, our quantamental analysis on the company’s home appliance business (includes both HVAC and consumer appliances) indicates that the company has further potential to improve its margins.

5. Mobile World Investment (MWG VN) – From Mobile Phones to Groceries

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On the tail of last years Smartkarma Originals series on ASEAN retail, we continue to search out compelling retail stories in the region. Mobile World Investment (MWG VN) is one of Vietnam’s most dynamic and interesting transformation stories in the consumer space, with exposure from mobile phones, to laptops, air conditioners, and modern trade groceries. The recent correction in the share price, despite positive results, presents an interesting entry point.

It started life as a mobile phone retailer through its “thegioididong” (TGDD) brand and subsequently built its “Dien May Xanh” (DMX) consumer electronics retail chain but as penetration in those areas has reached higher levels, the company has been moving into the underpenetrated grocery space through its “Bach Hoa Xanh” (BHX) brand grocery store. 

The company added more than two new stores per day in 2019 across all formats, ending the year with more than 3,000 stores, with both electronics retailer DMX and grocery retailer BHX surpassing 1,000 stores each. Despite its rapid expansion the company managed to improve margins last year.

The company will continue to expand rapidly over the next two years by opening new stores in other Provinces in South and Central Vietnam. 

The company successfully upgraded 500 of its Mini-DMX stores, where the number of products on display is doubled or even tripled. This transformation has seen sales increase by as much as 30% of the new format stores. 

Mobile World Investment (MWG VN) looks attractive from a valuation standpoint trading on 9.8x FY20E PER and 7.8x FY21E PER, with forecast EPS growth of +25% and +26% for FY20E and FY21E respectively. This is at a significant discount to peers, despite higher forecast growth rates.

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Brief Consumer: Holdco Analysis -Heineken Holding: NAV Discount Breaking Out to a Four-Year High and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Holdco Analysis -Heineken Holding: NAV Discount Breaking Out to a Four-Year High
  2. Central Retail IPO: Trading Debut, Valuation Scenario Analysis
  3. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place
  4. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic
  5. Coles Placement – Selldown from Wesfarmers Expected but Discount Is Narrow at the Top

1. Holdco Analysis -Heineken Holding: NAV Discount Breaking Out to a Four-Year High

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  • Smartkarma recently added a new company/holdco to its list of holdcos under the incredibly useful Holdco Monitor tool.
  • The latest addition to the tool is the European beer giant Heineken Holding Nv (HEIO NA) and its listed subsidiary Heineken NV (HEIA NA).
  • Below, we take a look at the two companies and evaluate the current holdco discount against different situations in Heineken’s history.

2. Central Retail IPO: Trading Debut, Valuation Scenario Analysis

Dcf

Central Retail (CRC TB), the retail arm of Central Group, is the leading multi-format, multi-category retailing platform in Thailand, Italy and Vietnam. Central Retail will commence trading on Thursday, 20 February. Central Retail set the offer price at THB42.00 per share, which is around the mid-point of the indicative price range of THB40-43 per share.

In our valuation note, we grudgingly noted that we would participate at most at the low-end of the IPO price range due to an undemanding rating. However, in a follow-on note, we stated that recent events have tipped the balance in favour of giving the IPO a pass. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is unattractive.

3. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place

  • XTep has followed Anta Sports Products (2020 HK) lead of 17th February and finally updated investors on the situation they are facing relating to the coronavirus disease 2019 (COVID-19) outbreak in China.
  • We examine the implications of the earnings outlook and timing. 
  • We question if the latest release should change our stance on the company.

4. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic

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  • LK has lost office consumers, as very few employees are in their offices.
  • LK also lost resident consumers, as delivery men cannot enter communities.
  • We believe LK can hardly survive the epidemic.

Our previous coverage on Luckin Coffee:

5. Coles Placement – Selldown from Wesfarmers Expected but Discount Is Narrow at the Top

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Wesfarmers Ltd (WES AU) is looking to sell 65.4m shares in Coles Group Ltd (COL AU). Post selldown, Wesfarners will still have about 10.1% stake in Coles.

The deal scores well on our framework owing to good short-term momentum, relatively better leverage than peers. However, the deal size is large, representing about 21 days of three-month ADV. 

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Brief Consumer: Central Retail Corp IPO: Valuation Palatable at the Low-End and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Central Retail Corp IPO: Valuation Palatable at the Low-End
  2. Nagacorp’s Solid Results Not Reflected in Trade Due To “Budding Alphas” The Market Does yet See
  3. Smoore Intl (思摩尔国际) Pre-IPO: Tripling Capacity in Three Years
  4. New Oriental (EDU): Stock Up 120% in 2019, But Still 23% Upside Due to Excellent Q2

1. Central Retail Corp IPO: Valuation Palatable at the Low-End

Forecasts

Central Retail (CRC TB), the retail arm of Central Group, is the leading multi-format, multi-category retailing platform in Thailand, Italy and Vietnam. Central Retail has set its IPO price range at THB40-43 per share to raise a total of THB67.6-72.7 billion ($2.2-2.4 billion).

In our initiation note, we stated that that Central Retail’s fundamentals are less than inspiring and characterised by pressure on the top-line and bottom-line along with low returns. Based on our assertion that the IPO needs to be priced at a discount to the sector to reflect the fundamentals, we would participate at most at the low-end of the IPO price range.

2. Nagacorp’s Solid Results Not Reflected in Trade Due To “Budding Alphas” The Market Does yet See

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  • Macau migrant play is pouring out a tide of strong VIP action to Manila and Cambodia among other ASEAN nations.
  • Prices for shares do not yet reflect catalysts not yet easily visible.
  • Revenues from VIP and mass grow prodigiously in comparison to slow recovery of Macau propelled by China “VIP refugees” and mass as well.”

3. Smoore Intl (思摩尔国际) Pre-IPO: Tripling Capacity in Three Years

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Smoore Tech is a leading e-cigarette and component manufacturer in China. The company was delisted from the venture board in China, the NEEQ, and is seeking a listing in Hong Kong to raise up to USD 400 million. In our previous note, we have looked at the company’s background, its brief financials, and its shareholders. We are impressed by the company’s stellar growth in the past and its technology-driven business. 

In this note, we take a closer look at the company’s latest IPO filing and the latest fund-raising before the listing. The main driver of the company’s 178% YoY revenue growth in 1H2019 was the ODM device business. The company is the number one e-cigarette OEM player in the world with the US being its largest source of revenue. The company is undergoing its capacity expansion plan in the next three years to triple its production capacity. In the pre-IPO fundraising in late last year, we note that there was a lack of presence of institutional investors. 

Our previous coverage on Smoore International

4. New Oriental (EDU): Stock Up 120% in 2019, But Still 23% Upside Due to Excellent Q2

Image 25915250771579546906059

  • EDU’s stock price had risen more than 120% in 2019.
  • The growth rate of both students and revenues accelerated in 2Q2020 (ended November 2019).
  • The operating margin turned to 3% in 2Q2020 versus -5% in 2Q2019.
  • The classroom-based business grew more rapidly than the online business and EDU has been utilizing learning centers more efficiently.
  • We believe, in fiscal 2020 (ended May 2020), total revenues will grow 29% and the operating margin will improve to 14% versus 10% in F2019.
  • The P/E band suggests an upside of 23%.

Our previous coverage on New Oriental:

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Consumer: The Market Is Overreacting to Lotte’s Inheritance Situation: Creating an Opening for a Short and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. The Market Is Overreacting to Lotte’s Inheritance Situation: Creating an Opening for a Short

1. The Market Is Overreacting to Lotte’s Inheritance Situation: Creating an Opening for a Short

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Shin Kyuk-ho, the founder of Lotte Group, passed away yesterday. The total value of his wealth is a little more than ₩1tril. The local news outlets report that he hasn’t left any will. So, the inheritance goes to the direct family members at a 1.5:1:1:1:1 ratio, 1.5 for his wife and 1 for each of the four children, including Shin Dong-bin.

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Brief Consumer: The Market Is Overreacting to Lotte’s Inheritance Situation: Creating an Opening for a Short and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. The Market Is Overreacting to Lotte’s Inheritance Situation: Creating an Opening for a Short
  2. Central Retail Corp IPO Initiation: Trouble at Till

1. The Market Is Overreacting to Lotte’s Inheritance Situation: Creating an Opening for a Short

4

Shin Kyuk-ho, the founder of Lotte Group, passed away yesterday. The total value of his wealth is a little more than ₩1tril. The local news outlets report that he hasn’t left any will. So, the inheritance goes to the direct family members at a 1.5:1:1:1:1 ratio, 1.5 for his wife and 1 for each of the four children, including Shin Dong-bin.

2. Central Retail Corp IPO Initiation: Trouble at Till

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Central Retail (192323Z TB), the retail arm of Central Group, is the leading multi-format, multi-category retailing platform in Thailand, Italy and Vietnam. Central Retail has set its IPO price range at THB40-43 per share to raise a total of THB67.6-72.7 billion ($2.2-2.4 billion). 

The IPO has got off to a good start with strong cornerstone support. However, we believe that Central Retail’s fundamentals are less than inspiring and characterised by pressure on the top-line and bottom-line along with low returns. We believe the IPO valuation needs to be a discount to the sector as a bare minimum to warrant any participation. 

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Brief Consumer: Central Retail IPO: Trading Debut, Valuation Scenario Analysis and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Central Retail IPO: Trading Debut, Valuation Scenario Analysis
  2. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place
  3. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic
  4. Coles Placement – Selldown from Wesfarmers Expected but Discount Is Narrow at the Top
  5. Page Industries (PAG IN)

1. Central Retail IPO: Trading Debut, Valuation Scenario Analysis

Sensitivity

Central Retail (CRC TB), the retail arm of Central Group, is the leading multi-format, multi-category retailing platform in Thailand, Italy and Vietnam. Central Retail will commence trading on Thursday, 20 February. Central Retail set the offer price at THB42.00 per share, which is around the mid-point of the indicative price range of THB40-43 per share.

In our valuation note, we grudgingly noted that we would participate at most at the low-end of the IPO price range due to an undemanding rating. However, in a follow-on note, we stated that recent events have tipped the balance in favour of giving the IPO a pass. Our DCF analysis supports this view and our DCF-based scenario analysis suggests that the IPO price is unattractive.

2. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place

  • XTep has followed Anta Sports Products (2020 HK) lead of 17th February and finally updated investors on the situation they are facing relating to the coronavirus disease 2019 (COVID-19) outbreak in China.
  • We examine the implications of the earnings outlook and timing. 
  • We question if the latest release should change our stance on the company.

3. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic

Image?1582013051

  • LK has lost office consumers, as very few employees are in their offices.
  • LK also lost resident consumers, as delivery men cannot enter communities.
  • We believe LK can hardly survive the epidemic.

Our previous coverage on Luckin Coffee:

4. Coles Placement – Selldown from Wesfarmers Expected but Discount Is Narrow at the Top

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Wesfarmers Ltd (WES AU) is looking to sell 65.4m shares in Coles Group Ltd (COL AU). Post selldown, Wesfarners will still have about 10.1% stake in Coles.

The deal scores well on our framework owing to good short-term momentum, relatively better leverage than peers. However, the deal size is large, representing about 21 days of three-month ADV. 

5. Page Industries (PAG IN)

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We argue that the rich valuations enjoyed by Page Industries (PAG IN) are not recession-proof as once assumed by many. Even products like Innerwear are subject to headwinds when the broader economic environment and consumer sentiment turns down.  

Volume recovery remains the key for PAG IN. The investments made by PAG IN in technology and sales may not yield the desired results as the operating environment has changed compared to the previous slow down.  Trading at ~52x FY2021 consensus EPS estimates the room for further disappointments from PAG IN remains. 

You are currently reading Executive Summaries of Smartkarma Insights.

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Brief Consumer: Central Retail Corp IPO Initiation: Trouble at Till and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Central Retail Corp IPO Initiation: Trouble at Till

1. Central Retail Corp IPO Initiation: Trouble at Till

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Central Retail (192323Z TB), the retail arm of Central Group, is the leading multi-format, multi-category retailing platform in Thailand, Italy and Vietnam. Central Retail has set its IPO price range at THB40-43 per share to raise a total of THB67.6-72.7 billion ($2.2-2.4 billion). 

The IPO has got off to a good start with strong cornerstone support. However, we believe that Central Retail’s fundamentals are less than inspiring and characterised by pressure on the top-line and bottom-line along with low returns. We believe the IPO valuation needs to be a discount to the sector as a bare minimum to warrant any participation. 

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Brief Consumer: Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place and more

By | Consumer Sector, Daily Briefs

In this briefing:

  1. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place
  2. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic
  3. Coles Placement – Selldown from Wesfarmers Expected but Discount Is Narrow at the Top
  4. Page Industries (PAG IN)
  5. Yum China (YUMC): Still Yummy?

1. Notes from the Silk Road: XTep Int’l Holdings (1368 HK): Negative Earnings Watch in Place

  • XTep has followed Anta Sports Products (2020 HK) lead of 17th February and finally updated investors on the situation they are facing relating to the coronavirus disease 2019 (COVID-19) outbreak in China.
  • We examine the implications of the earnings outlook and timing. 
  • We question if the latest release should change our stance on the company.

2. Luckin Coffee (LK) On the Ground: Lost Residential and Office Consumers Due to Epidemic

Image?1582013051

  • LK has lost office consumers, as very few employees are in their offices.
  • LK also lost resident consumers, as delivery men cannot enter communities.
  • We believe LK can hardly survive the epidemic.

Our previous coverage on Luckin Coffee:

3. Coles Placement – Selldown from Wesfarmers Expected but Discount Is Narrow at the Top

Image 889030668131582012659516

Wesfarmers Ltd (WES AU) is looking to sell 65.4m shares in Coles Group Ltd (COL AU). Post selldown, Wesfarners will still have about 10.1% stake in Coles.

The deal scores well on our framework owing to good short-term momentum, relatively better leverage than peers. However, the deal size is large, representing about 21 days of three-month ADV. 

4. Page Industries (PAG IN)

Shareprice

We argue that the rich valuations enjoyed by Page Industries (PAG IN) are not recession-proof as once assumed by many. Even products like Innerwear are subject to headwinds when the broader economic environment and consumer sentiment turns down.  

Volume recovery remains the key for PAG IN. The investments made by PAG IN in technology and sales may not yield the desired results as the operating environment has changed compared to the previous slow down.  Trading at ~52x FY2021 consensus EPS estimates the room for further disappointments from PAG IN remains. 

5. Yum China (YUMC): Still Yummy?

Kfc%20and%20pizza%20hut%20have%20a%20new%20delivery%20service%20in%20china?1581663069

On the last quarterly earnings, Yum China Holdings, Inc (YUMC US) management stated that they have successfully fended off the inflated chicken raw material price as they have around 300 chicken suppliers in China and by launching innovative products that use a less premium part of a chicken.

The Novel Coronavirus outbreak has caused significant disruption to the business, confirmed by the management that more than 30% of the total number of restaurants were closed and the outlets that remained open are significantly impacted by travel restriction, suspended festivities and shortened operating hours as people do not go out as much. 

Despite the Coronavirus crisis, the company’s share price has not been that depressed compared to the others such as Xiabuxiabu Catering Mgt Chn Hldgs (520 HK) . Therefore it is the right time to short-sell/reduce holdings in Yum China with potential earnings drop of between 39 to 49%

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