In today’s briefing:
- Chow Tai Fook (1929 HK): Disappointed
- Webtoon Entertainment IPO: The Bull Case
- [Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat
- Luckin’s Small Step into Non-Coffee Drinks Is a Big Step of Its Future Directions
- HKTV (1137 HK): 9th July Vote On Share Buy-Back
- Companies with Low ROEs Have Corporate Governance Practices that Only Make It So
- Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
Chow Tai Fook (1929 HK): Disappointed
- Chow Tai Fook Jewellery (1929 HK) reported a weaker-than-expected FY24 net profit. Despite having HK$2.2bn net cash, the lack of a special dividend is even more disappointing.
- Surge in unrealised loss on gold loans and a YoY contraction in margin have contributed to the poor 2H24 result. Apr-May operating figures showed a deteriorated operating environment.
- Lacking a special dividend, CTF no longer looks attractive at the current level. Overoptimistic FY25 and FY26 consensus forecasts mean earnings downgrade pressure.
Webtoon Entertainment IPO: The Bull Case
- Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
- Webtoon is the leading web-comic player in all its major geographies, including Korea, the US and Japan. Naver Corp (035420 KS) and LY (4689 JP) are the primary shareholders.
- The bull case rests on a large TAM, rising monthly active users, strong constant currency growth supported by monetisation initiatives, a shift to profitability, and cash generation.
[Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat
- Travel and box office data in the past three-day Dragonboat Holiday showed worrying weakness despite sharp price cuts by hotel and airlines.
- Removing travellers from Hong Kong, inbound travel was also quite bad;
- E-Commerce sales backed by trade-in stimulus outperformed regular merchandises, indicating consumer confidence is still low. We believe the weak travel data boded ill for consumption throughout the year.
Luckin’s Small Step into Non-Coffee Drinks Is a Big Step of Its Future Directions
- Luckin launched lemonade drinks with raging success of 5.08 mn cups sold for the first week, ~10% of store sales. Market cheered to send the stock higher;
- We view it with mixed feelings. While it is margin accretive and sales enhancing, is not conducive to improving coffee penetration and cultivating consumers’ habit for drinking coffee;
- We see Luckin as increasingly one of, instead of the, street drink company, because lemonade is actually the top selling SKU of all milk tea vendors in China.
HKTV (1137 HK): 9th July Vote On Share Buy-Back
- Back on the 22nd May, online shopping platform play Hong Kong Television Network (1137 HK) announced a buy-back of 11.25% of shares out, at $2.15/share, a 20.8% premium to undisturbed.
- Should the Offer complete, co-founder Ricky Wong’s stake, together with concert parties, increases to 51.55% (before exercising options), up from 45.75% currently. Optically, it’s a opportunistic share grab.
- The Offer Doc is now out, with an EGM to vote on the whitewash waiver on the 9th July.
Companies with Low ROEs Have Corporate Governance Practices that Only Make It So
- Companies with the ROE over 15% have higher market capitalization, foreign ownership, and Tobin’s Q, and naturally higher ROA, while the opposite tends to be true companies with low ROE.
- Groups with ROE above 15% have generally improved their corporate governance practices, but they still need to address their use of cash in order to further improve return on capital.
- It’s clear that companies with low ROE have the form of board practices but not the substance, and that they don’t have a clear policy for increasing return on capital.
Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
- Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM at 40.9%, and SG&A ratio down to 35.6%.
- KFC Holdings opened 51 new stores, remodeled 183 stores, and increased delivery service stores to 942, boosting system sales by 10.5% YoY.
Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
- Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM up 0.4pp to 40.9%, and SG&A ratio down 1.3pp.
- KFC Holdings opened 51 new stores, remodeled 183 stores, and increased delivery service stores to 942, boosting system sales by 10.5%.
Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
- Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM at 40.9%, and SG&A ratio down to 35.6%.
- KFC Holdings opened 51 new stores, remodeled 183 stores, and increased delivery service stores to 942, boosting system sales by 10.5% YoY.
Kfc Holdings Japan (9873 JP): Full-year FY03/24 flash update
- Revenue increased 10.8% YoY to JPY110.7bn, driven by an 8.0% YoY rise in comparable store sales and 35 new stores.
- Operating profit rose 61.8% YoY to JPY5.9bn, with OPM at 5.3%, GPM up 0.4pp to 40.9%, and SG&A ratio down 1.3pp.
- System sales grew 10.5% YoY, with customer count down 2.5% YoY and average spend per customer up 10.8% YoY.
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