Analyst

Steve Zhou, CFA

Equity Bottom-Up

<ul>
<li>After a strong 68% increase in share price in 2023, <a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> has been trading range bound, and up 8% year-to-date in 2024. </li>
<li>Continued weakness in Japan on the profitability front in 1HFY24 offset continued strong performance in China.</li>
<li>Japan's operating profit is set to improve in the second half of the current fiscal year (ending August), and China's strength will continue on the back of accelerating store openings. </li>
</ul>


After a strong 68% increase in share price in 2023, Saizeriya (7581 JP) has been trading range bound, and up 8% year-to-date in 2024. 
Continued weakness in Japan on the profitability front in 1HFY24 offset continued strong performance in China.
Japan's operating profit is set to improve in the second half of the current fiscal year (ending August), and China's strength will continue on the back of accelerating store openings. 


Saizeriya (7581 JP):  Buy On Any Weakness On A More Profitable Japan And Continued Strength In China

<ul>
<li>
<a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> reported FY1Q24 results (September to November) last week.  Sales grew 22% yoy, and was 2% higher than company guidance.  Operating profit grew 104%.</li>
<li>Operating profit for the Asia business, the key growth driver of the company, was Y3.3bn, up 56% yoy and above management guidance. </li>
<li>Overall thesis remains intact, as the Asia business performed slightly better than expectations. </li>
</ul>



Saizeriya (7581 JP) reported FY1Q24 results (September to November) last week.  Sales grew 22% yoy, and was 2% higher than company guidance.  Operating profit grew 104%.
Operating profit for the Asia business, the key growth driver of the company, was Y3.3bn, up 56% yoy and above management guidance. 
Overall thesis remains intact, as the Asia business performed slightly better than expectations. 


Saizeriya (7581 JP):  Asia Business Slightly Beat While Japan Operating Profit Missed

<ul>
<li>I continue to believe that Saizeriya is the best pick for gaining exposure to Asia/China restaurant space.</li>
<li>Saizeriya has a very clear business strategy and focus:  price.  The founder Yasuhiko Shogaki made it clear that price always comes first, and everything else second. </li>
<li>Looking ahead, the runway for growth in China is huge.  The company is currently only in 3 cities for a total of 373 stores as of end-FY23 year ending August.</li>
</ul>


I continue to believe that Saizeriya is the best pick for gaining exposure to Asia/China restaurant space.
Saizeriya has a very clear business strategy and focus:  price.  The founder Yasuhiko Shogaki made it clear that price always comes first, and everything else second. 
Looking ahead, the runway for growth in China is huge.  The company is currently only in 3 cities for a total of 373 stores as of end-FY23 year ending August.


Saizeriya (7581 JP):  Best Pick For Asia/China Restaurant Space

<ul>
<li>
<a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China. </li>
<li>The Asia segment, which is primarily restaurants in China, nearly doubled operating profit in FY23 (year ending August) from pre-COVID FY19.</li>
<li>The company is trading at 27x FY24E PE, with more than 80% expected growth in operating profit in FY24. </li>
</ul>



Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China. 
The Asia segment, which is primarily restaurants in China, nearly doubled operating profit in FY23 (year ending August) from pre-COVID FY19.
The company is trading at 27x FY24E PE, with more than 80% expected growth in operating profit in FY24. 


Saizeriya (7581 JP):  Japanese Company + Fast Casual Italian Food = China Growth Story?

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kfc-holdings-japan-ltd" target="_blank" data-smartkarma-citation="entities:12358:1" rel="noopener">Kfc Holdings Japan (9873 JP)</a> has recommended a tender offer from <a href="https://www.smartkarma.com/entities/carlyle-group-inc-the" target="_blank" data-smartkarma-citation="entities:33402:1" rel="noopener">Carlyle Group / (CG US)</a> at JPY6,500 per share, a 20.4% premium to the last close. </li>
<li>The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.54% ownership ratio.</li>
<li>Due to the <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a> irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid. </li>
</ul>



Kfc Holdings Japan (9873 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY6,500 per share, a 20.4% premium to the last close. 
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.54% ownership ratio.
Due to the Mitsubishi Corp (8058 JP) irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid. 


KFC Holdings Japan (9873 JP): Carlyle Finger Lickin' Tender Offer at JPY6,500

Japan

RESORTTRUST, INC. plans, develops, markets, and operates timeshare resort hotels under the "XIV" and "SUN MEMBERS" brand name.  The Company's resort facilities are located in the suburb of major Japanese cities.  Resorttrust operates golf courses.

ROUND ONE Corporation operates bowling alleys and video game arcades.  The Company operates primarily in the Osaka area.

TORIDOLL Holdings Corporation operates a variety of restaurants such as skewered grill chicken, Japanese noodle, ramen noodle, Japanese-style pancake, and pasta restaurants.  The Company operates its business at food courts in shopping centers, stations, highway rest areas, and suburbs.

create restaurants holdings inc. operates direct-run Western, Chinese, and Japanese restaurants.  The Company also operates fast food restaurants.

create restaurants holdings inc. (3387 JP)

KYORITSU MAINTENANCE CO., LTD operates student dormitories and dormitories for young businessmen throughout Japan.  The Company builds condominiums and dormitories.

Food & Life Companies Limited operates sushi restaurant chains. The Company operates kaiten sushi stores and restaurants, sushi takeout, sushi bars with snacks, and more. Food & Life Companies serves customers worldwide.

FUJI KYUKO CO., LTD. provides passenger rail and bus transportation and taxi services in Shizuoka, Yamanashi, and Kanagawa prefectures.  The Company leases and sells real estate, operates department store, and offers construction works. Fuji Kyuko also operates amusement parks, hotels, golf course, skiing ground, restaurants, and other leisure-related businesses.

ICHIBANYA CO., LTD. operates a chain of restaurants specialized in curry dishes nationwide.  The Company operates both franchise and directly managed restaurants.  The Company also sells its curry by mail order.

COLOWIDE CO., LTD. manages, as a holding company, its group companies that operate Japanese style pub restaurant chain named Kantaro and Italian restaurant chain named Itameshiya La Pausa primarily in Tokyo.  The Company also operates KARAOKE business.

OHSHO FOOD SERVICE CORP is a Kansai-based operator of Chinese restaurants.  The Company operates directly-run restaurants in Kansai, Chubu, and Kanto regions. Ohsho Food Service also wholesales food material to franchise stores.  The Company mainly sells noodle and gyoza dumpling.

Domino's Pizza Enterprises Limited is a franchise licence owner of the Domino's Pizza. The Company sits in the quick service restaurant segment within fast food retail and has a license which covers Australia, New Zealand, France, Belgium, The Netherlands and the Principality of Monaco. The Domino's brand is owned by Domino's Pizza, Inc, a listed US company.

SJM Holdings Limited offers amusement and recreation services.  The Company operates casinos, hotels, and other tourism-related facilities in Macau.

NagaCorp Limited is a leisure and tourism company with casino operations in Phnom Penh, the capital city of Cambodia. The Company also offers hotel accommodation, manages food and beverage outlets, recreational facilities, entertainmentand retail operations.

Hotel Properties Limited, through its subsidiaries, operates and manages hotels. The Company also operates restaurants and retails and distributes food and fashion merchandise.  In addition, Hotel Properties trades shares, develops and invests in properties, hotels, and resorts.

Kangwon Land Inc. is a casino and hotel services provider located in the Kangwon province area of South Korea.  The Company develops abandoned mines and builds gaming and entertainment facilities.  Kangwon Land operates a number of game tables and slot machines for domestic and international customers under its gaming licenses.

BTG Hotels (Group) Co., Ltd. operates a tourism business.  The Company also invests in hotel and restaurant management, as well as provides advertising and exhibition center management services.

Shenzhen Overseas Chinese Town Co Ltd invests in and manages theme parks in China.  The Company, through its subsidiaries, also provides travel agency service.

Shenzhen Overseas Chinese (A) (000069 CH)

Westlife Development Limited is an operating-cum-investment company that puts up and operates quick service restaurants. The Company, through its subsidiary, operates fast food franchise restaurants across western and southern India.

Bloomin' Brands Inc. owns and operates a chain of casual dining restaurants. The Company offers its products and services through company owned and franchised locations throughout the United States and internationally.

Bloomberry Resorts Corp is a holding company for its subsidiaries which provide lodging and leisure services. The Subsidiaries operates and develops, tourist facilities, casinos, and hotel and amusement-themed projects.

SAIZERIYA CO., LTD. operates an Italian restaurant chain based in the Tokyo metropolitan area.  The Company's menu includes pizza, pasta, seafood, and meat entrees.

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Saizeriya (7581 JP)