Firstly the trademark to the namesake brand is a issue that a lot of restaurant chains and operators have particularly in Asia and it’s a common thing to see. I’ve analysed various restaurant chains in SE Asia, India, and China and most have the same issue. So there’s an issue but what’s the rationale that you can give for it. Well almost Zhang Yong’s entire net worth comes from Haidilao stock except for his Singapore landed property holdings which he’s also financed using dividends from Haidilao and he needs the dividends to finance both his real estate purchases in Singapore as well as his lavish lifestyle there. If Zhang Yong were to take the trademark away from Haidilao and try to open a private chain of his own he’d have to watch his entire net worth evaporate. Don’t forget that he owns 65% percent or so of Haidilao along with his wife.
Secondly, I completely disagree if you wanna know the ins and outs of the hotpot industry and why Haidilao’s brand is supreme. Just buy a flight ticket, go to China and try to get a table without having to wait 2 hours. If you don’t want to do that then just look at the three year numbers of Jiumaojiu and Xiabuxiabu and compare them to Haidilao. Yeah right they aren’t even close in terms of both sheer numbers and growth
Great stuff! But I am failing to understand the dividend thesis here. They dont have a very successful history of dividend paying. Its only in 2024 that they have paid out reasonable dividend. Would it be fair to extrapolate it to future. Secondly I couldnt tally per share dividend with the impact in financial cash flow. The maths doesn't work.
No you’re just looking at numbers and not thinking and analysing. Before 2020 they used to be a growth company growing store count by 15-20% a year and revenues and profits by 50% a year no need to pay dividends then when you could keep reinvesting to grow. Then the COVID lockdown came in growth stalled and even regressed, the company had to go to defensive mode and they started optimising per store operations rather than spending to grow. Very different scenario. Numbers aren’t everything. The thesis for both investors and management has changed and you have to adjust your outlook accordingly. I don’t get what you mean by “per share dividend with the impact in financial cash flow” please elaborate.
Mate, how about you just add the per share dividend they’ve declared,maybe your data aggregator has wrong numbers; It’s very common with Chinese and HK listed stocks. They paid out 0.824 HKD in Sep and 0.24 HKD in June add them both and you get 1.215 HKD take out the yield from there.
They’re at mid 1300s when it comes to store count and will be more prudent opening new stores. It was a miscalculation made by the management then which could’ve been done by even the best managers on the planet.
I’m more conservative with my estimates and only assume 2-5% compounded store growth every year. There’s no point in rapidly expanding store count to 1500-1600 now when macro has been so uncertain for a while now. It’s rather better to upsize and upscale existing restaurants and I agree with the management on this
We are not fond of the structure of Haidilao ’
s business as it doesn ’ t own the trademark to its namesake
brand. Instead, the firm licenses the Haidilao brand from a company privately held by founder Zhang
Yong. We think this model exposes Haidilao ’
s shareholders to additional risks and contingencies.
The hot pot chain operates in a highly competitive industry marked by nonexistent switching costs,
minimal barriers to entry, and quickly evolving consumer preferences. Even with the firm ’
s leadership in
the hot pot category, long-term investors will need to contend with the cyclicality of a no-moat business
as well as potential corporate governance issues.
Well two things:-
Firstly the trademark to the namesake brand is a issue that a lot of restaurant chains and operators have particularly in Asia and it’s a common thing to see. I’ve analysed various restaurant chains in SE Asia, India, and China and most have the same issue. So there’s an issue but what’s the rationale that you can give for it. Well almost Zhang Yong’s entire net worth comes from Haidilao stock except for his Singapore landed property holdings which he’s also financed using dividends from Haidilao and he needs the dividends to finance both his real estate purchases in Singapore as well as his lavish lifestyle there. If Zhang Yong were to take the trademark away from Haidilao and try to open a private chain of his own he’d have to watch his entire net worth evaporate. Don’t forget that he owns 65% percent or so of Haidilao along with his wife.
Secondly, I completely disagree if you wanna know the ins and outs of the hotpot industry and why Haidilao’s brand is supreme. Just buy a flight ticket, go to China and try to get a table without having to wait 2 hours. If you don’t want to do that then just look at the three year numbers of Jiumaojiu and Xiabuxiabu and compare them to Haidilao. Yeah right they aren’t even close in terms of both sheer numbers and growth
Copied this from a morning star report, thanks for the insights!😃 Gonna buy that gem if available for me.
Great stuff! But I am failing to understand the dividend thesis here. They dont have a very successful history of dividend paying. Its only in 2024 that they have paid out reasonable dividend. Would it be fair to extrapolate it to future. Secondly I couldnt tally per share dividend with the impact in financial cash flow. The maths doesn't work.
No you’re just looking at numbers and not thinking and analysing. Before 2020 they used to be a growth company growing store count by 15-20% a year and revenues and profits by 50% a year no need to pay dividends then when you could keep reinvesting to grow. Then the COVID lockdown came in growth stalled and even regressed, the company had to go to defensive mode and they started optimising per store operations rather than spending to grow. Very different scenario. Numbers aren’t everything. The thesis for both investors and management has changed and you have to adjust your outlook accordingly. I don’t get what you mean by “per share dividend with the impact in financial cash flow” please elaborate.
As per the CF statement, they paid out 700M HK$ in dividend in last 2 quarters which doesn't translate to 7% dividend yield.
https://drive.google.com/file/d/1U-rwMtp3mAYDhFo3v3wWkFaskicRALGt/view?usp=sharing
Mate, how about you just add the per share dividend they’ve declared,maybe your data aggregator has wrong numbers; It’s very common with Chinese and HK listed stocks. They paid out 0.824 HKD in Sep and 0.24 HKD in June add them both and you get 1.215 HKD take out the yield from there.
This is serious,closing down 260 out of 300,I hope they were able to reopen this time around?
They’re at mid 1300s when it comes to store count and will be more prudent opening new stores. It was a miscalculation made by the management then which could’ve been done by even the best managers on the planet.
I’m more conservative with my estimates and only assume 2-5% compounded store growth every year. There’s no point in rapidly expanding store count to 1500-1600 now when macro has been so uncertain for a while now. It’s rather better to upsize and upscale existing restaurants and I agree with the management on this
Okay
Informative
Phenomenal post. I really enjoyed reading. Keep it up!
Thank you so much Andreas