Agree on your treatment of lease liabilities. It's a stupid idea to treat this as debt. As long as you use net income or EBITDA making sure that it's adjusted for rent if accounted as interest + depreciation, all good.
Why do you think its mispriced by the market?
I don't like the 75% largest shareholder.
Also their dividend policy is strange if they could reinvest funds in opening new stores, why pay out?
1- it’s a HK stock, hated market. All Chinese stocks are undervalued relative to the rest of the world. The payout policy mitigated this because we still earn the dividends.
2- they do both. They earn enough cash to do both.
I know this is an older comment, but I'd push back on this response pretty heavily as I'm interested in the idea.
You presented a peer group of other HK stocks that are all valued at significantly higher multiples. These stocks are, in fact, valued at or above what I would expect a small U.S.-listed restaurant company to trade at, so clearly, HK restaurants aren't getting much of a discount just for being HK-listed.
Sure, there's probably an illiquidity discount on this stock due to the float-adjusted market cap, but there is almost certainly a real reason that this one trades at a discount.
I do think that the low valuation of shares in Hong Kong is actually nothing out of the ordinary. The H share index, for example, has a P/E ratio of only 6-7 and price to book below 1.
Thank you for the write up. It was very useful to learn about this small cap and has intrigued me. Would be great if you also talk about management in more detail including if the founder is visionary, has previous track record, any on ground feedback on how employees feel about the offering and if they ever considered share buybacks?
Living in HK and having dined in more restaurants than I care to count I can tell you that some of theirs are the real deal compared to the average bland food most serves, will look further into the financials thanks !
If anything, most HK people are spending their money in Shenzhen, which tells me that this company does do something right if people are hopping onboard it's concepts.
It will be interesting to see how the company performs moving forward. In any event, this was an enjoyable read
I agree it looks attractive. One concern is the durability of the business. It seems as though local tastes have changed - Cafe de Coral and Fairwood appear to have fallen out of favor. Wonder how long Taste Gourmet can keep customers coming back.
Agree on your treatment of lease liabilities. It's a stupid idea to treat this as debt. As long as you use net income or EBITDA making sure that it's adjusted for rent if accounted as interest + depreciation, all good.
Why do you think its mispriced by the market?
I don't like the 75% largest shareholder.
Also their dividend policy is strange if they could reinvest funds in opening new stores, why pay out?
1- it’s a HK stock, hated market. All Chinese stocks are undervalued relative to the rest of the world. The payout policy mitigated this because we still earn the dividends.
2- they do both. They earn enough cash to do both.
I know this is an older comment, but I'd push back on this response pretty heavily as I'm interested in the idea.
You presented a peer group of other HK stocks that are all valued at significantly higher multiples. These stocks are, in fact, valued at or above what I would expect a small U.S.-listed restaurant company to trade at, so clearly, HK restaurants aren't getting much of a discount just for being HK-listed.
Sure, there's probably an illiquidity discount on this stock due to the float-adjusted market cap, but there is almost certainly a real reason that this one trades at a discount.
Did you ever get to the bottom of this?
Reading for tonight! Here from twitter
When you have a dream, you've got to grab it and never let go
Cheers!
Amazing
Thank you!
I do think that the low valuation of shares in Hong Kong is actually nothing out of the ordinary. The H share index, for example, has a P/E ratio of only 6-7 and price to book below 1.
see here: https://www.msci.com/documents/10199/e66bf075-4775-470c-a7ab-2e9defe09332
Agree with you on the first point- except, 1- most aren't growing as fast and 2. most don't have this dividend payout policy.
Thank you for the write up. It was very useful to learn about this small cap and has intrigued me. Would be great if you also talk about management in more detail including if the founder is visionary, has previous track record, any on ground feedback on how employees feel about the offering and if they ever considered share buybacks?
Living in HK and having dined in more restaurants than I care to count I can tell you that some of theirs are the real deal compared to the average bland food most serves, will look further into the financials thanks !
Thank you for your comment!
Here from X. Thanks for sharing.
Good write up, here via twitter.
I will read it tomorrow again when i am on my way to work.
Good writeup but weird to use Dianping when HKers use Openrice more often (doesn't change your overlying views though: https://www.openrice.com/zh/hongkong/r-que-%E9%8A%85%E9%91%BC%E7%81%A3-%E8%A5%BF%E5%BC%8F-r834463) and also make the assumption that CCP policies have a direct impact on HK local spending (they don't, especially since there is still a reduced amount of mainlanders coming to HK for travel/tourism purposes - https://www.statista.com/statistics/1089267/hong-kong-number-of-visitor-arrivals-from-mainland-china/).
If anything, most HK people are spending their money in Shenzhen, which tells me that this company does do something right if people are hopping onboard it's concepts.
It will be interesting to see how the company performs moving forward. In any event, this was an enjoyable read
Thank you I really appreciate your comment!
I used Dianping for the Chinese mainland stores.
If the economy can stay stable I think they will grow a lot. But yes, will be interesting to see what happens!
I agree it looks attractive. One concern is the durability of the business. It seems as though local tastes have changed - Cafe de Coral and Fairwood appear to have fallen out of favor. Wonder how long Taste Gourmet can keep customers coming back.
Hi, thanks for writing about this! Just wanted to share this writeup by another substacker https://orientalvalue.substack.com/p/taste-gourmet-8371-hk. I see a lot of similarities there. Hope it's of value to compare and contrast.
Thank you!