Fast food’s deflationary boom

Consumer Discretionary

CHA-AM Advisors

Fast food has been a true nightmare in China in the past five years. First the pandemic then the inflation and then an odd period when menu prices were falling due to competitive pressures but costs were still inflating. However, these winds eventually swing around. Costs are now falling due to lower food prices. Add in increased efficiencies and more automation and margins are already recovering. The share price doesn’t seem to have noticed yet. David Scott's preferred play is Haidilao International, describing it as an "outstanding investment opportunity". However, he thinks the Asian industry as a whole now looks interesting. The average ROE of the 21 companies examined is 13% while the average EV/Sales is 1.8x. Other stocks flagged include MK Restaurants and Cafe de Coral.

- 12 July, 2024

Worst is over on the China regulatory front: 4 high conviction long ideas...

RedTech Advisors

Haidilao (6862 HK) - This hot pot chain is ideally placed to benefit from the 'Great reopening of China'. RedTech’s latest consumer survey’s indicate strong demand and long-term growth opportunities.
BOSS Zhipin / Kanzhun (BZ US) - Continues to be sold off as a targeted victim of the government’s crackdown, but as a market leader in job recruitment its interests should be very well aligned with the government.
JD.com (9618 HK) - Low regulatory risk and as incomes rise and tastes move up market, JD is well positioned to capture those upwardly mobile consumers.
JD Health (6618 HK) - Key regulatory obstacles will be swept away in the coming 1-2 years and the combination of JD’s userbase and JD Health’s one-stop digital offering should position it well to ride the wave.

- 27 May, 2022