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

Steven Chen

Quality-first, Business-perspective Strategy

Equity Bottom-Up

<ul>
<li>Another victim of the pandemic, Tang Palace, appears attractive with a single-digit P/E and a juicy FCF yield based on pre-COVID financials;</li>
<li>However, investors should, by no means, draw their deep-value conclusion without a full examination of the business economics;</li>
<li>We employ the same framework as we did with other names previously to assess the value-trap risks.</li>
</ul>


Another victim of the pandemic, Tang Palace, appears attractive with a single-digit P/E and a juicy FCF yield based on pre-COVID financials;
However, investors should, by no means, draw their deep-value conclusion without a full examination of the business economics;
We employ the same framework as we did with other names previously to assess the value-trap risks.


<ul>
<li>The stock of Water Oasis is hitting a mid-single-digit P/E and a high-teens FCF yield;</li>
<li>But buying cheap does not always produce a sizable return for owners;</li>
<li>We would like to examine the business fundamentals through a few factors that help identify a value trap.</li>
</ul>


The stock of Water Oasis is hitting a mid-single-digit P/E and a high-teens FCF yield;
But buying cheap does not always produce a sizable return for owners;
We would like to examine the business fundamentals through a few factors that help identify a value trap.


Thematic (Sector/Industry)

<ul>
<li>Beaten-down industries often offer rare opportunities for investors to buy quality businesses at attractive prices;</li>
<li>We feel that the valuations of a few Hong Kong-based beauty service providers seem at least reasonable;</li>
<li>Then the question would be whether the "cheap" business is truly of high quality (i.e., a well-moated compounder);</li>
<li>As always, we advocate focusing solely on winners that are persistently profitable, high-return, and cash-rich;</li>
<li>We took a look at three such players in this space and concluded with only one of them worth an "investable" status.</li>
</ul>


Beaten-down industries often offer rare opportunities for investors to buy quality businesses at attractive prices;
We feel that the valuations of a few Hong Kong-based beauty service providers seem at least reasonable;
Then the question would be whether the "cheap" business is truly of high quality (i.e., a well-moated compounder);
As always, we advocate focusing solely on winners that are persistently profitable, high-return, and cash-rich;
We took a look at three such players in this space and concluded with only one of them worth an "investable" status.


A Look at Hong Kong's Beaten-Down Beauty Service Stocks

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

Union Medical Healthcare, the largest provider of aesthetic medical services in Hong Kong, plans to raise US$150m through its IPO in Hong Kong. As per media reports, the company is in the pre-marketing stage and could launch the IPO as soon as next month.In this insight take a look at some of the factors that could impact the deal. Post deal launch we will follow up with another insight to discuss valuations. At the outset a 64% CAGR in revenue appears impressive, however, a closer look reveals a few cracks in revenue and earnings growth. In addition, were one to exclude the revenue from unutilized of pre-paid treatments, there wouldn't be much earnings left.

Union Medical Healthcare, the largest provider of aesthetic medical services in Hong Kong, plans to raise US$150m through its IPO in Hong Kong. As per media reports, the company is in the pre-marketing stage and could launch the IPO as soon as next month.In this insight take a look at some of the factors that could impact the deal. Post deal launch we will follow up with another insight to discuss valuations. At the outset a 64% CAGR in revenue appears impressive, however, a closer look reveals a few cracks in revenue and earnings growth. In addition, were one to exclude the revenue from unutilized of pre-paid treatments, there wouldn't be much earnings left. 

Union Medical Healthcare Pre-IPO Review - Dressed up with More than Its Fair Share of Botox

Hong Kong

Anxian Yuan China Holdings Limited is a holding company. The Company, through its subsidiaries, operates cemetary business.

Green International Holdings Limited manufactures and trades toys and recreational products. The Company's product categories include hard and electronic toys for children, educational and recreational, soft toys, and sports products.

SDM Group Holdings Limited, through its subsidiaries, operates dance institutions for children in Hong Kong. The Company's schools offer courses in jazz, ballet, hip-hop and latin dance.

Steve Leung Design Group Limited provides interior designing services. The Company offers apartments, restaurants, and hotels interior designing services . Steve Leung Design Group provides services worldwide.

Sun International Group Limited offers equine services. The Company provides horse breeding, horse trading, horse raising, and other services. Sun International Group also operates futures trading, enterprise placement, financial credit financing, asset management, and other businesses.

Modern Beauty Salon Holdings Limited operates beauty salons, spas, and fitness centers. The Company offers  services that include beauty and facial, spa and message, slimming, and fitness services.

Hephaestus Holdings Limited offers interior design services. The Company provides services for private residences, corporate offices, service apartments, hotels, residential clubhouses, show flats, and sales galleries. Hephaestus Holdings serves customers in Hong Kong.

Sino-Life Group Ltd provides funeral services in Taiwan and China.

Shi Shi Services Limited offers property management services through online platform. The Company provides housing management, pension, hospital, and education services in the community. Shi Shi Services conducts businesses in China.

Dadi Education Holdings Limited provides overseas studies consultancy services. The Company offers secondary education and higher education services to students in the United Kingdom, Australia, and Canada.

Kukbo Design Co., Ltd. provides interior design services for hotels, office buildings, residential buildings, and special facilities.  The Company's services include planning design, detail design, remodeling, and construction.

Prestariang Berhad is an information and communication technology (ICT) company. The Company provides ICT training and certification courses in Malaysia. Prestariang Bhd also provides software licensing distribution and management.

Shine Corporate Ltd. is a national law firm. The Firm's areas of practice includes personal injuries law, family law, property law, class actions, wills, probate and residential conveyancing.

With us Corporation operates cram schools in the Kinki area.  The Company is active in education for elementary and junior high school students.  With us also operates preparatory schools for Daiken (university entrance qualification exam).

Virscend Education Company Limited is a K-12 private education company. The Company provides foreign exchange programs, mandates English to be taught, and provides different schools with different focuses.

Centro Escolar University, an institution of higher learning, provides instruction and training programs in the Philippines. The company establishes, maintains, and operates educational institutions that offer programs in the fields of arts and sciences for classes in tertiary level. It provides various college and graduation courses, including dentistry, optometry, music, and public administration in the fields of commerce, science, and arts; and 11 under graduation programs. The company also specializes in medical technology, nursing, education, nutrition, optometry, pharmacy, and business education courses. It operates in Mendiola, Malolos, Makati-Gil Puyat, and Makati-Legaspi. Centro Escolar University was founded in 1907 and is based in Manila, the Philippines.

Huali University Group Limited provides educational services. The Company offers private higher education, private vocational education, and other related services. Huali University Group provides services in China.

China Maple Leaf Educational Systems Limited is a Chinese international school operator. The Company operates high schools, middle schools and elementary schools across various Chinese cities.

China Maple Leaf Educational Systems (1317 HK)

TAKE AND GIVE. NEEDS Co., Ltd. provides wedding arrangement services.  The Company's wedding planners plan and coordinate weddings by arranging ceremonies with restaurants and banquet halls in the Tokyo metropolitan area.

WW International, Inc. provides weight control programs. The Company offers subscriptions for commitment plans that give their clients access to meetings and online subscriptions, as well as gives their members guidance and access to a supportive community to help enable them for healthy habits. WW International serves customers worldwide.

Water Oasis Group Limited distributes exclusively ~H2O+ brand skin-care products in Hong Kong, Macau, Taiwan and China. The Company also operates spa centers under the Oasis Spa, Oasis Beauty, and Oasis Beauty Homme brand names.

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Water Oasis (1161 HK)

Tang Palace: Deep Value or Value Trap

Current share price points to juicy yields on a pre-COVID basis, but is there any value trap? We examine business economics in detail.

Steven Chen

Water Oasis: Deep Value or Value Trap?

Buying cheap does not necessarily produce sizable returns. We employ our value-trap framework to assess the risk profile of Water Oasis, a...

Steven Chen

A Look at Hong Kong's Beaten-Down Beauty Service Stocks

The Hong Kong beauty service industry is among the hardest-hit throughout the pandemic. We recommend focusing solely on the highest-quality and...

Steven Chen

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tang Palace: Deep Value or Value Trap

Current share price points to juicy yields on a pre-COVID basis, but is there any value trap? We examine business economics in detail.

Steven Chen

Water Oasis: Deep Value or Value Trap?

Buying cheap does not necessarily produce sizable returns. We employ our value-trap framework to assess the risk profile of Water Oasis, a...

Steven Chen

A Look at Hong Kong's Beaten-Down Beauty Service Stocks

The Hong Kong beauty service industry is among the hardest-hit throughout the pandemic. We recommend focusing solely on the highest-quality and...

Steven Chen

Union Medical Healthcare Pre-IPO Review - Dressed up with More than Its Fair Share of Botox

Union Medical Healthcare, the largest provider of aesthetic medical services in Hong Kong, plans to raise US$150m through its IPO in Hong Kong. As...

Sumeet Singh