I agree with the overall thesis of your report, but things can change quickly. Restaurant Brands which owns KFC, Pizza Hut, Taco Bell in NZ, Aust, USA etc stock price is down 75% in 12 months with competition with Mickey Dees and others ramping up, cost pressures incl wage inflation, staff shortages, chicken costs soaring, insurance costs etc. Coupled with a surge in interest costs/rental increases as well profits which were large are now minimal at best. The outlook 18 months ago looked great similar to YUM, and it turned on its head in a manner of months. High fixed costs, margin compression and profits got wiped out overnight. Now a class action against KFC Australia for non payment of breaks, the CFO and CEO resigned/retired - dividends cut.
Yum China is managing costs extremly well. With more variable rents, and a focus on cash flow, I see these risks as low. Nonetheless I will follow all developments closely, in the case that something changes.
You need conviction in your ideas. If you dont want to invest in China, thats fine. But i want to share my toughts:
1. Taiwan is no reak risk, because an Invasion would effect all stocks around the world. NVIDIA and the MAG7 would crash massively. But the Taiwan risk has in my opion gone down since the election there. While the anti-china Party won, the new PM doesnt have control over the legislative. This is in fact in the control of the pro-china party. So for now there is no need to invade. And I hold shares of defense stocks and VALE, which would spike in this case.
2. Chinas economy is strong. While therr are some short term troubles, they will deal with it and emerge stronger from it. The chinese middle class is gigantic and will grow massively. Thats the reason why nearly all american companies (which are in the S&P 500) are investing in China. Starbucks, Nike, Apple, etc. It's the market were they have the biggest and fastest growing customer base.
3. While China is "communist", thats actually not true. There economic Model is capitalism on steroides. Alibaba issued It's firts dividend and companies are buying back shares. So it's not like shareholders will never see money. The Balance sheets are great and insiders are buying (See Jack Ma or Joey Wat).
The only risk I see are sanctions on China by the U.S. This could happen, but even the U.S. realizes that China is getting strenger ny the day. They should have done this long ago because the time window is closing.
I primarily see the political risks and the arbitrariness. And don't apologize for the long answer! It's great and shows that you care about this and put a lot of effort into your thoughts :).
Really interesting idea. Thanks for the write up. Might slot nicely into a basket of "never let a good crisis go to waste" China Basket. Any thoughts for others that could be considered (bar the obvious: BABA etc). Cheers
Thank you so much. Well obviously Alibaba, Tencent, JD, YUMC and Jinko Solar. Maybe even some Chinese banks, but this isn’t my field of expertise. My friend @InvestRoiss probably knows some interesting names. If you’re into energy you can look at the Chinese oil giants.
Thanks for the write-up!
I did a write-up myself nuancing two of the main differences between Yum China Holdings and YUM! Brands.
https://jaminvest.substack.com/p/hk-4-yum-china-is-not-yum-brands
Thanks ❤️
I agree with the overall thesis of your report, but things can change quickly. Restaurant Brands which owns KFC, Pizza Hut, Taco Bell in NZ, Aust, USA etc stock price is down 75% in 12 months with competition with Mickey Dees and others ramping up, cost pressures incl wage inflation, staff shortages, chicken costs soaring, insurance costs etc. Coupled with a surge in interest costs/rental increases as well profits which were large are now minimal at best. The outlook 18 months ago looked great similar to YUM, and it turned on its head in a manner of months. High fixed costs, margin compression and profits got wiped out overnight. Now a class action against KFC Australia for non payment of breaks, the CFO and CEO resigned/retired - dividends cut.
Yum China is managing costs extremly well. With more variable rents, and a focus on cash flow, I see these risks as low. Nonetheless I will follow all developments closely, in the case that something changes.
Interesting company, but it is still China! Not investable from my point of view. China exposure from my European and US investments is risky enough.
You need conviction in your ideas. If you dont want to invest in China, thats fine. But i want to share my toughts:
1. Taiwan is no reak risk, because an Invasion would effect all stocks around the world. NVIDIA and the MAG7 would crash massively. But the Taiwan risk has in my opion gone down since the election there. While the anti-china Party won, the new PM doesnt have control over the legislative. This is in fact in the control of the pro-china party. So for now there is no need to invade. And I hold shares of defense stocks and VALE, which would spike in this case.
2. Chinas economy is strong. While therr are some short term troubles, they will deal with it and emerge stronger from it. The chinese middle class is gigantic and will grow massively. Thats the reason why nearly all american companies (which are in the S&P 500) are investing in China. Starbucks, Nike, Apple, etc. It's the market were they have the biggest and fastest growing customer base.
3. While China is "communist", thats actually not true. There economic Model is capitalism on steroides. Alibaba issued It's firts dividend and companies are buying back shares. So it's not like shareholders will never see money. The Balance sheets are great and insiders are buying (See Jack Ma or Joey Wat).
The only risk I see are sanctions on China by the U.S. This could happen, but even the U.S. realizes that China is getting strenger ny the day. They should have done this long ago because the time window is closing.
Sorry for the long response 😄
I primarily see the political risks and the arbitrariness. And don't apologize for the long answer! It's great and shows that you care about this and put a lot of effort into your thoughts :).
Thanks 🙏
Really interesting idea. Thanks for the write up. Might slot nicely into a basket of "never let a good crisis go to waste" China Basket. Any thoughts for others that could be considered (bar the obvious: BABA etc). Cheers
Thank you so much. Well obviously Alibaba, Tencent, JD, YUMC and Jinko Solar. Maybe even some Chinese banks, but this isn’t my field of expertise. My friend @InvestRoiss probably knows some interesting names. If you’re into energy you can look at the Chinese oil giants.
Cheers 🍻