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

Steven Chen

Quality-first, Business-perspective Strategy

Equity Bottom-Up

Tam Jai International is a fast-casual restaurant chain based in Hong Kong, specializing in Yunnan-style rice noodles (mixian) through its "TamJai Yunnan Mixian" and "TamJai SamGor Mixian" brands. The company offers customizable noodle dishes with various soup bases and toppings, and also operates Japanese dining brands Marugame Seimen and Yakiniku Yamagyu under franchise in Hong Kong. It was founded in 1996 and is headquartered in Cheung Sha Wan, Hong Kong.

<ul>
<li>We tend to shy away from the restaurant industry but decided to make an exception for Tam Jai;</li>
<li>The brand has become a household name in Hong Kong and delivers attractive business economics for owners from its home market;</li>
<li>However, we see multiple red/yellow flags when it comes to the management's capital allocation, particularly relating to overseas expansion.</li>
</ul>


We tend to shy away from the restaurant industry but decided to make an exception for Tam Jai;
The brand has become a household name in Hong Kong and delivers attractive business economics for owners from its home market;
However, we see multiple red/yellow flags when it comes to the management's capital allocation, particularly relating to overseas expansion.


Tam Jai International: High-Quality Assets, Low-Quality Capital Allocation

Calnex Solutions PLC designs, produces, and markets test instrumentation and solutions. The Company offers products and services for network synchronization and network emulation. Calnex Solutions serves telecoms network operators, network providers, systems suppliers, laboratories, and network infrastructure worldwide.

<ul>
<li>Despite a micro-cap status, Calnex is the key player behind the evolution of high-speed network infrastructure on a truly global basis;</li>
<li>The company has a market-dominant position at several critical points across the global telecoms ecosystem;</li>
<li>The recent plunge in share price demonstrates Mr. Market's short-termism and presents a good opportunity for incoming shareholders, in our opinion.</li>
</ul>


Despite a micro-cap status, Calnex is the key player behind the evolution of high-speed network infrastructure on a truly global basis;
The company has a market-dominant position at several critical points across the global telecoms ecosystem;
The recent plunge in share price demonstrates Mr. Market's short-termism and presents a good opportunity for incoming shareholders, in our opinion.


Calnex: De-Facto Standards for High-Speed Network Infrastructure Worldwide

RH distributes home furnishing products. The Company offers products such as furniture, lighting, textiles, bathware, decor, outdoor, and garden, as well as baby and child products. RH distributes its products through retail stores, catalogs, and websites.

<ul>
<li>RH is the only luxury lifestyle brand at scale on this planet;</li>
<li>Both qualitative and quantitative evidence point to the emerging and probably widening economic moat around the business;</li>
<li>We see rich optionality regarding RH's growth trajectory moving forward;</li>
</ul>


RH is the only luxury lifestyle brand at scale on this planet;
Both qualitative and quantitative evidence point to the emerging and probably widening economic moat around the business;
We see rich optionality regarding RH's growth trajectory moving forward;


Tobila Systems Inc. develops telecommunication software. The Company designs junk phone filtering systems, information processing platforms, and other mobile related products. Tobila Systems serves customers in Japan.

<ul>
<li>This is our second Insight into Tobila Systems - the absolute dominator in the niche of fraud/spam call and message filtering services in Japan;</li>
<li>We like the high-quality, unique assets owned by the company, although capital allocation appears to stand out as a wild card in our formula of long-term shareholder-value creation;</li>
<li>At the current level, we would hold the shares firmly and wait patiently for more opportunistic offerings from Mr. Market to accumulate more shares.</li>
</ul>


This is our second Insight into Tobila Systems - the absolute dominator in the niche of fraud/spam call and message filtering services in Japan;
We like the high-quality, unique assets owned by the company, although capital allocation appears to stand out as a wild card in our formula of long-term shareholder-value creation;
At the current level, we would hold the shares firmly and wait patiently for more opportunistic offerings from Mr. Market to accumulate more shares.


Credit Acceptance Corporation provides funding, receivables management, collection, sales training, and related services to automobile dealers.  The Company provides indirect financing for buyers with limited access to traditional sources of consumer credit.  Credit Acceptance operates in the United States.

<ul>
<li>We try to stay away from the fool's errand of forecasting the economy;</li>
<li>But often, we notice that high-quality businesses actually benefit from harsh economic conditions in terms of (long-term) shareholder value;</li>
<li>We provided an example of a company that we own to illustrate how.</li>
</ul>


We try to stay away from the fool's errand of forecasting the economy;
But often, we notice that high-quality businesses actually benefit from harsh economic conditions in terms of (long-term) shareholder value;
We provided an example of a company that we own to illustrate how.


Urbem (HK) Limited

Steven CHEN is a quality-first, business-perspective investor.

Steven can be reached at schen@urbem.cn or steven@hillsidewealth.ca.

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

Tam Jai International: High-Quality Assets, Low-Quality Capital Allocation

We would have to stay on the sidelines for now but would revisit the investment thesis in case of a drastic shift in the management's capital...

Steven Chen

Calnex: De-Facto Standards for High-Speed Network Infrastructure Worldwide

Mr. Market's short-termism presents a rare opportunity for investors to acquire shares in this high-quality business at a reasonable price.

Steven Chen

RH: A One-Of-Its-Kind Business

Short-termist Mr. Market appears quite bearish on this winning luxury lifestyle brand, creating opportunities for long-term, patient investors.

Steven Chen

Tobila Systems: A Deep-Dive View

High-quality, predictable, high-growth business with slightly questionable capital allocation; shares modestly overvalued; we would hold and wait.

Steven Chen

A Blessing in Disguise

Here is one reason why tough economic times can, to some degree, be good news to some (long-term) shareholders of high-quality businesses.

Steven Chen