Shanghai trip

Sorry for the delayed articles. I went Shanghai with my family for a vacation. As you know, the world is currently very worried about the growth of the Chinese economy. Recent happenings such as currency devaluations, new normal growth, Xi's corruption crackdown etc. have definitely caught the attention of the market. In short, people are very concerned if the slowdown in China would have a spillover effect on other countries as well.

I am not going to predict where China is heading because most likely I would get it wrong. Anything can happen in the short term. However, I can comfortably say that I know how to analyze a company and I am able to separate good companies from the bad ones. This article is about good companies I discovered when I was walking in the streets of Shanghai.

China Mobile (0941.HK)

China Mobile is an investment holding company. Through its subsidiaries, it is mainly engaged in the provision of telecommunication services, particularly in voice and data services. For better understanding, it is similar to Maxis, Digi, Celcom etc.

Its voice services include local calls, domestic long distance calls, international long distance calls, intra-provincial roaming, inter-provincial roaming, international roaming and voice value-added services. On the other hand, its data services are SMS & MMS, Wireless Data Traffic, Applications and Information Services.

As of December 2014, China Mobile is the world's largest mobile phone operator by subscribers.

Belle International (1880.HK)

Belle International mainly engages in the manufacture, distribution and retailing of shoes and footwear products. It is divided into two business segments: footwear and sportswear.

The footwear segment engages in product research and development, procurement, manufacturing, distribution and retailing of company-owned brands and distribution brands.

Company-owned brands

Belle, Teenmix, Tata, Staccato, Senda, Basto, JipiJapa, Millie's, Joy & Peace, 15MINS and Mirabell.

Distribution brands

Bata, Clarks, Hush Puppies, Mephisto, BCBG, Merrell and Caterpillar.

The sportswear segment engages in retail distribution of first-tier and second-tier sportswear brands. The first-tier sportswear brands include Nike and Adidas and second-tier sportswear brands PUMA, Converse and Mizuno.

Due to the emergence of eCommerce, its share price has dived to historical low. In view of China's fragmented footwear industry, it is believed that out of 5 women in China, there is 1 wearing Belle's footwear product, commanding a market share of approximately 20%.

BreadTalk (5DA.SI)

BreadTalk, a company listed in Singapore, operates a chain of retail outlets selling a wide selection of breads, buns, cakes and pastries. Its breads and buns are made at individual retail outlets. Other than bakery, it is also involved in restaurant businesses such as Din Tai Fung, Food Republic, Toast Box, RamenPlay, Carl's Jr., The Icing Room and J.CO. Donuts & Coffee.

Furthermore, it involves itself in property sector to minimize rental costs and getting better locations. Investigate this company and you will notice that these business segments actually complement each other in a good way.

Due to its high depreciation costs and bank borrowings, analysts have always been pessimistic on BreadTalk. Personally, I do not think so. Looking at its huge operating cash flows, manageable interest expenses, good expansion rates etc., BreadTalk is the right company to hold for long term.

Oh by the way, BreadTalk has presence in Shanghai and it focuses most of its outlets in or around train stations.

Last words...

These 3 companies are discovered in the streets of Shanghai. An ordinary investor can do his/her due diligence in spotting good companies merely by observations. If you notice a shop or product with wide distribution network or it's very popular, google it to find out if they are listed!

If you wish to learn, in a more detailed manner, how do I analyze a company using my 5R Model and how do I calculate the intrinsic value of a company, please click here to get my Value Investing All-In-One eBook.

#shanghai #chinamobile #belle #breadtalk