Yum China Holdings Inc (YUMC-N)

Uncertainty with QSR is that previous changes were difficult because it's a multi-brand platform. Valuation is very reasonable. Very good growth profile and management. Balance sheet is not investment grade, and some don't care. He cares, as it's difficult to grow if you're not investment grade. Investment grade gives you much larger pool of people who can supply capital.

Likes QSR, but owns YUMC instead. YUMC wins from a valuation and growth perspective, but also has more geopolitical risk.

Wins big on valuation. Massive amount of cash on balance sheet, no debt. Trades around 14x earnings. Valuation due to negative sentiment on Chinese economy. Very robust FCF yield. Massive opportunity for growth over the next 10 years at a very discounted valuation. Yield is 1.7%.

Hurt by Covid, but has come out flying. Took advantage of low interest rates to accelerate store rollouts. A lower-risk way to play a Chinese recovery.

Valuation is in the dumps. First-class operator. Rock-solid balance sheet, no debt at all. Net cash north of $2.5B. Great management team and digital capabilities. With cash so available, increased store count during distressed times. Unique, best of breed, depressed valuation of 16x adjusted earnings. 

Over 400M loyalty members on digital app, more than entire US population, which highlights just how well they can grow. Better growth outlook than almost everyone in its space. Yield is 1.6%.

Spun off by Yum! Brands, so pure-play China but with western governance. Lower-risk way to play exceptional growth in China. Pristine balance sheet with more than $3B cash. Strong management. Accelerating store buildout. Amazing digital capabilities. Amazing valuation. Yield is 1%.

Can play offense aggressively. About $3B in net cash on balance sheet. Used excess capital to accelerate store buildout and growth profile. Results from this won't be seen for 5-10 years. Wonderful management and best-in-class digital capabilities. Pursued vertical integration to secure product availability. Yield is 0.90%.

Exceptionally well run. Amazing digital capabilities. China is an unpenetrated market. Negatively affected by sentiment, and that's when you want to take advantage. Still holds, and would be willing to buy today.

She has held Yum Brands for years. When it spun off Yum China, her clients acquired some Yum China shares automatically. Yum China is strictly in China. It pays royalties to Yum Brands for its KFC and Pizza Hut brands. When she invests new money, she invests in Yum Brands, not Yum China. Yum China’s stock dropped significantly today. They have a good presence in China, as a first mover in their space, but the Chinese market is very competitive. The stock price has been volatile because of rumours that the company would be taken over by a Chinese group. With the 12% drop today, this might be a good time to step in to this stock. She had confidence in the consumer in China and this is a company within that space. However, her preference is with the parent, which has exposures to other growing markets such as India and Russia, as well as China. She prefers that diversification and the simplicity of the royalty model.