Yum China 2Q17 Earnings Call Notes

Micky Pant

Same store sales +3%

“Our second quarter results continue to illustrate strong performance of Yum China with overall same-store sales growth up plus 3% and systems sales up plus 7% before foreign exchange translation. KFC delivered strong performance with same-store sales up plus 4% and Pizza Hut same-store sales were flat with a year ago. Operating profit increased sharply plus 64% to $143 million primarily aided by the benefit of retail tax reform and same-store sales leverage. On a fully diluted basis our EPS was $0.27 up 29% year-on-year.”

Dining experience changing very rapidly

“in-store is also mobile and that the actual the experience is changing very rapidly at mobile. If you now come to China and visit a KFC you will be surprised of the number of people not standing in line but actually ordering on their phone just like you would at an airport where you check in at a machine. And also Alipay, WeChat have been very good at expanding their networks and promoting it well. As a result of that we believe China is far ahead of anybody else in terms of mobile payment. Obviously, when you pay through mobile you capture data, there is all that convenience. So the delivery has always been significantly mobile led but now large part of their retail dining experience is also going through mobile so exactly on the margin.”

Jacky Lo

7% wage inflation

“There were several factors that impact our second quarter financial results that will probably continue through the rest of the year. First, is restaurant labor inflation. Our wage inflation was 7% and commodity inflation was 4% during the second quarter. While wage inflation is an inevitable challenge in the restaurant business, we will continue to find better ways to schedule our crew and streamline operating efficiencies and processes. As for commodity inflation, we expect the rate to moderate through the balance of the year and we are maintaining our guidance of low single digit inflation for the full year.”

Yum China 4Q16 Earnings Call Notes

Micky Pant

7500 restaurants in China

“Over the past three decades and you can see on slide seven, we have built an unrivaled national presence and today we have over 7,500 restaurants across 1,100 cities in China. There are more KFCs in China than in any country in the world, including the United States.”

Rapid adoption of digital impacting dining experience

“In China today, the rapid adoption of digital technology by consumers is impacting many aspects of the dining experience, from store and menu selection, to payment and feedback. Digital technology is transforming every step of the customer journey and we’re taking steps to make this a competitive advantage to drive sales.”

Not a single country where digital adoption higher than China

“I have not, from the experience around the world, seen a single country where the adoption of digital technology is at a higher level than China. It’s extraordinary how people’s lives revolve around digital technology. And particularly impressive is the transition of almost over two years from zero credit card or anything other than cash to suddenly, in some stores, cashless payment being a majority of our sales. So I think that this rapid increase has been two factors, one is the adoption by technology by customers in general, outstanding technology partnerships like WeChat Pay or AliPay and we have been their lead partners in expanding it. I’m very optimistic that that number will continue to grow. And then of course, it’s being driven on the back of all the great work that Joey and the team have done on digital marketing in general which links the customer experience with the ability to pay. But you go to stores in China now and regularly, you will see people paying with their cell phones in a variety of retail formats. So we expect that to continue to grow and we’re encouraged by it.”

Xinyuan Real Estate 3Q16 Earnings Call Notes

Yuan Zhang

Government announced tightening measures to cool real estate development in several cities

“And now, let’s talk about the government policy changes. In early October, when the Chinese real estate market was experiencing a meaningful development, the local governments in about 20 cities announced the tightening measures designed to cool a market with escalating prices. These measures announced included higher down payments and home purchase restrictions. Despite the restriction policy, the overall underlying home buying demand remains favorable in our local markets. For example, in our Zhengzhou International New City Phase I project nearly 100% of presold units were booked on Alibaba’s house booking system within a few hours. And nearly no buyers withdrew their deposit after the restriction policy was issued. From the beginning of this year, housing prices increased dramatically in certain cities in China. While we’re sharing the benefit of the price upside, we believe the goal of the government’s restriction policy is to maintain healthy and stable development of the market by cooling down escalating prices in certain cities, which we support for the long-term sustainable growth of our business.”

This is the third time that local government has imposed restriction policies

“Actually as far as I can recall, this is the third time that the local government are imposing the restriction policies. According to our prior experience the restriction policies probably could last for six or nine months, less than a year. And also we believe the goal of the policy is to cool down the fast growing prices in some cities and areas, and try to make the market more healthy. And this is what we are looking for. And try to give you some example, from the beginning of the year until the end of September, most – almost all of our project are benefitting from the pricing outside – from well-buy [ph] from 30% to even 50%. So we believe the policy may cool down the prices for a while, but we are confident for the market momentum, because we believe the demand is still there”

Alibaba FY 2Q17 Earnings Call Notes

Alibaba Group Holding (BABA) Q2 2017 Results

Daniel Yong Zhang

Consumer behavior is evolving dramatically

“Consumer behavior is evolving dramatically as the population getting younger and more proactive in upgrading their lifestyles. At the same time, merchant increasing dramatically with latest technologies inspires them to embrace new ways to improve business efficiency and serve customers. We believe the convergence of these factors will bring about a significant disruption of the existing commercial landscape and emergence of a new retail model.”

Not just about growing online in isolation

“The most important opportunity on horizon is helping traditional business to upgrade into a new retail model and not continuing to grow online business in isolation. Online and offline will be a single seamless experience, not just in consumer interaction, but also in the entire business operation and execution. We want to improve efficiencies across the entire value chain of product design, manufacturing, distribution and the services.”

Joseph C. Tsai – Alibaba Group Holding Ltd.

We in a process with the SEC

I’ll address the second question. As you know, we’ve been in the process of – with the SEC, they’ve sent us a letter inquiring as to a number of issues. On this, we’ve been very transparent with you guys about what’s going on. We disclosed all the issues involved and the fact that we’re voluntarily cooperating with the SEC in their inquiry. We don’t think there’s any factual basis to the New York Post story. So on that score, when we have real news we will update everyone.

Xinyuan Real Estate 1Q16 Earnings Call Notes

Xinyuan Real Estate (XIN) Q1 2016 Results

George Liu

Benefitted from favorable government policies in real estate

“During the first quarter, Xinyuan continued to benefit from favorable government policies in China’s real estate sector, which how support the markets we sell. Our sales also benefited from our choice of projects in the Tier 1 and 2 cities that have favorable economy and population growth trends, and where we have an existing presence and good track record of performance.”

Acquired property in Manhattan

“While the newly acquired project located in midtown Manhattan, our architectural, engineering and marketing teams have already been assembled. The project is currently in the planning and design stage, and will be a mixed use project, which will include some retail space.
As just discussed, our new Manhattan project represents our second land acquisition in New York City, which we announced in January.

Expecting stability from favorable government policies

“As we look ahead to the remaining quarters of 2016, while there still remains uncertainty in the real estate industry, we believe market conditions will be stable in the coming quarter and expect favorable government policies to continue to enjoy additional demand for our projects.”

Land prices 40000 RMB per square meter in Beijing

“Kunshan in Beijing as you can see from our announcement that land acquisition cost per square meter construction area, we’re talking about roughly RMB11,000 per square. However, neighborhood the land, the property – the residential property has been so and roughly RMB40,000 per square meter and any new land lots that in option being pushed up a rather neighborhood and probably would be started in RMB30,000 to RMB35,000 per square meter.”

Company has 13% cost of debt in the US, but 7-7.5% in China

“Yes, again as I just mentioned that the rate is about 13% U.S. dollar bond is definitely something which we are taken serious condition – calculation and they have many ways we’re doing. In off shore bond we can get and a cost like 8% or 9% is also a good way to reprice that.
And for the onshore bonds, apart from the 7% or 7.5% financing cost that we have on the current onshore bonds, if we can continue to get those money at a reasonable financing cost by below 8%. It might be – we might consider to repricing to use that to replace cost loans that we are paying across higher than 8%.

YUM! Brands 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Beginning in April, KFC sales in China were significantly impacted by the intense media surrounding avian flu…Fortunately, the extensive media surrounding avian flu in China has subsided, and same-store sales at KFC are on the road to recovery. In fact, our KFC same-store sales decline in June was 13% versus the 26% decline we just reported for the second quarter.”

“Speaking of power brands in China, I couldn’t be more pleased with the very strong performance of Pizza Hut casual dining, which delivered solid same-store sales growth in the quarter, up 7%”

“Pizza Hut casual dining is unquestionably the leading Western casual dining concept in China, with over 900 units in 228 cities. Importantly, we continue to have less than three year cash paybacks on new units and the business is on track to deliver another strong year in 2013.”

” We like how we’re positioned in a country with over 1 billion people, and even though the economy is slowing, it’s still the world’s fastest growing economy, and is expected to grow about 7% this year.”

“In the 10-year period from 2002 to 2012, our franchise units almost doubled, from 7,000 to 13,000.”

“Let me now spend a minute talking about how diversified this global portfolio is. Let’s first look at the regional balance. We have a large and growing presence in Asia, which accounts for 28% of our franchise fees. The Americas account for 22% of our fees. Europe also accounts for 22% of YRI fees. To round out the world, 60% of our franchise fees come from the Middle East and Africa, and 12% from Australia and New Zealand.”

“our franchise fees reflect our dominant presence in high-growth emerging markets. Emerging markets currently account for about 45% of our revenue stream,”

[US Business] “In terms of our franchise ownership, a decade ago 28% of our units were company-owned, while 72% were franchise. Through our franchising efforts, we are now 90% franchised. This should help deliver more consistency going forward since there is less profit volatility associated with a franchise business.”

“As we have said before, our U.S. business has become more weighted towards Taco Bell performance. Taco Bell currently contributes about 50% of our U.S. operating profit, and our ownership structure reflects this. We now have 5% ownership of KFC and about 8% ownership of Pizza Hut. However, we are targeting our Taco Bell ownership at about 15%.”

“I think the biggest thing we see going on in China continues to go on, and that’s that the consuming class continues to grow. You know, it’s 300 million today, it’s expected to be 600 million people by 2020…There’s a bit of a slowdown, but their slowdown is, I think, a pretty rapid rate when you compare it to what’s going on everywhere else in the world.”

“When you have powerful brands, you innovate, you provide everyday affordable value, you operate your business well with good service, you can win.”

“we had estimated for the China division for the full year was about 3% food cost inflation…we’re now expecting food inflation to be about flat on the year. What we’ve seen year to date is deflation.”

“It’s pretty nice when you have products that nobody will ever have but us…I think the big thing about Doritos Locos Tacos is no one else has it.”

“As we’ve indicated before, we are shifting our new unit openings increasingly to lower-tier cities for KFC and more broadly to Pizza Hut casual dining”

Focus Media 4Q12 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$FMCN Focus Media Holdings 4Q12 Earnings Call Notes

“In terms of the ad environment, in the fourth quarter, because of the political tension between China and Japan, the auto sector was quite badly affected. A lot of the Japanese auto ended up not putting a whole lot of budget onto sort of what we call the medium- to high-end media companies. So for the most part, I think the fourth quarter is, to a large extent, affected by that, though we see some recovery to it at the end of December last year in terms of that segment. But as of right now, we still haven’t seen it back to what we would consider to be normal, sort of normal in terms of the environment. In terms of the outlook for the current year, it’s still — to put it in short, it’s still unclear as far as how it’s going to pan out. As of the way that we look at it, currently, is that given the change in the government, in China for the most part, we believe that there will be a transition phase in terms of when a lot of the policy that’s been talked about will start to take in — take effect in the country. Until then the macroeconomy, I think for the most part, I think you probably read in a lot of different media reports as well as like your shops in terms of different [indiscernible] banks outlook, there’s still some uncertainties as far as how the macroenvironment will pan out. And given advertising is highly correlated to the macro in terms of the economic environment, at the moment, it’s difficult to tell exactly how it’s going to pan out for 2013. We’re keeping a close eye on it. I mean, the best I could — we could try to — help to — and try to take a look at it is that, in terms of qualitatively, the environment in the first quarter as compared to fourth quarter, is about similar. If you really want to drill down to it may be slightly better, but not a whole lot better.”

Chinese Markets Look Like 2012 Too

Earlier in the week I posted that the $SPX has started the year on virtually the same pace that it started last year.  It turns out that Chinese equities are on a similar path as well, but a slightly less favorable one.

Even though China and the US both got off to fast starts in 2012, the Chinese markets (represented here by $FXI) started to roll over in February.  This year $FXI tracked the $SPX rise through January but has diverged since the beginning of February once again.  Since US stocks ended up giving up almost all of their gains in April and May of 2012, one could argue that Chinese markets sensed economic weakness before US markets did.  Let’s hope that this year doesn’t continue to repeat.  Last year Chinese equities and many US listed stocks sympathetic to the Chinese markets (e.g. metals and mining companies) didn’t really find their footing until September.

China vs. US Stocks