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  1. #61
    Join Date
    Jun 2004
    , , New Zealand.


    Quote Originally Posted by Snoopy View Post
    I can offer the following observations:

    1/ YUMC is very will capitalised (no term debt), so is well placed to ride out any short term downturn. The strength of the underlying business model has not changed.
    2/ YUMC is fundamentally a domestic company with most food ingredients grown and supplied from within China. So there is unlikely to be any shortage of product for sale from international trade restrictions.
    3/ People still have to eat and one of YUMC's very strong points of difference is food hygiene standards. By that I mean they have a standard (not that it is necessarily world class by western standards) whereas most local food restaurant businesses have no quality control standard at all. This means local people may be more inclined to eat at a YUMC restaurant than 'Chin's Diner'.
    So VG, you have posted a link which is a regurgitation of a link I posted nine days earlier? I am not quite sure the point you are thinking readers should deduce from this, since your post did not contain your own take on this matter.

    What I can say is that whether you consider YUMC is a 'consumer staple' or not (I am not clear on this point), it has been a good place to hide from 'market turmoil' over the last month. As I write this, the YUMC share price is still higher than it was a month ago ($42.41 on 10th February to $43.92 today, a gain of 3.6%) and there is an exchange rate gain for NZ based holders as well ($NZ1 = $US64 at start of period vs $NZ1 = $US63, a gain of 1.6%). Over the same period the DOW (note YUMC is NYSE listed) has declined from 29,276 to 23,851, a drop of more than 18%.

    I didn't pick any of this in advance, although my subsequent 'observations', quoted above, may explain what happened 'with the benefit of hindsight'. This is one reason that I prefer to have a few global investments that are not available on the NZX so that I can participate in markets and sectors that are not easily accessible here. One could argue that ATM is an equivalent 'local opportunity' to gain exposure to the consumer food market in China. The ATM share price has risen from $NZ15.75 to $NZ16.10 over the same period, a gain of 2.2%. So ATM has underperformed YUMC over the last month. The historical PE ratio of ATM is now 37 verses only 24 for YUMC. There are other similarities like both companies having no term debt. I like both companies, but the value proposition of YUMC is clearly superior. So YUMC is where my 'China market' money will be staying.

    Last edited by Snoopy; 11-03-2020 at 11:11 AM.
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  2. #62
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013


    Sorry I have posted it by mistake instead of other link. I found somewhere Yum China has been recognized as one of the world's most innovative companies for 2020, and is one of only a few restaurant holding companies in the world to be included. Its innovation is the major force behind Yum China's growth strategy. With this coronavirus drama, I believe there will be some great opportunities.
    Last edited by Valuegrowth; 15-03-2020 at 09:58 PM.


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