YumChina (NYSE:YUMC)

[Snoopy]

So Snoopy, after all this analysis, have you invested? I've opened an account with Hatch, might buy a few YUMC to get started.

I am convinced Yum China is a very good company. I particularly like the fact that they can open a KFC restaurant and have all incremental expenditure needed to do that paid back within a couple of years. But successful investment is not just about sharemarket investors buying good companies. What investors need is to buy good companies at good value prices. I see Yum China last traded at $US45.24. Based on last years (2017) results, this represents an historical PE ratio of:

$45.24 / $1.52 = 29.8

This is very high. I would like to wait to see the full results from last year released, to see if such a lofty PE ratio could be justified. Right now, I won't be investing more money into Yum China.

If I was a new investor, I would be waiting for something negative to happen that caused the YUMC share price to fall a bit (bearing in mind YUMC is very strong at its core and the SP should bounce back), and allow a more favourable investment entry price. YUMC has had a series of mishaps outlined earlier on this thread, that dragged their reputation down, for a while at least. The next mishap could be next week. But it could be five years away.

Cricketfan, YUMC fell 3.49% on Friday down to $42.57. That is more than any of the underlying US indices fell and all were down. This stoush between Trump and Chinese President Xi is exactly the kind of event that we investors look for to bring share prices down to more reasonable levels.

Many here will see YUMC as just another US corporation liable to feel the backlash, if not from tariffs, then from an anti-US feeling from the loyal Chinese citizen consumers against the USA. But as you can see below, it isn't.

If we look at YumChina, their success seems due to their ability to be seen as a Chinese company (the senior executive team is Chinese, they sell franchises to local Chinese) that provide tangible benefits for Chinese workers. Raising the standard of living of the Chinese people is something the Chinese government have been very successful at. And I would say any China based business that produce for all stakeholders benefits in line with the Chinese government's vision will continue to do well.

Watch the misguided masses sell this one down. Then be ready to pounce. But will the share price go low enough to make this a deal that new investor's can't turn down? That remains to be seen.

SNOOPY