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1、1/12,2/12,3/12,4/12,5/12,6/12,7/12,8/12,9/12,10/12,11/12,12/12,EquityResearchReport/CateringSector,120.0,(HK$),26,24,NC,Auditor,Caf de Coral Holdings(00341.HK)Steady growth with smooth operation,17 Jan 2013Investment HighlightsSound operation leads to sustainable growth.From FY1990 to FY2012,the rev
2、enue,profit attributable to shareholders and market capitalization ofCDC Group increased by 8.8 times,4.8 times and 16.7 times respectively.Presently CDCs business is based in Hong Kong,and strives to explore themainland China market.The sound operation is estimated to lead the groupto achieve a sus
3、tainable growth.We expect the FY2013-FY2015E CAGR ofCDCs total revenue to be approximately 11%.Fast growth of catering industry in mainland China is vital for CDCsfuture growth.As Hong Kong catering industry gets saturated,we believe itis vital for CDC to apply the multi-area and multi-brand strateg
4、ies topenetrate more market segments to sustain its future growth.We expect the,HOLD(Initiation)Share Price:HK$22.40Target Price:HK$23.50CSI Research DepartmentYa JiangTel:(8621)68761982Email:Xueqin ZhaoTel:(8621)68762787Email:Price ChartTurnover(HK$mn)Cafe de CoralMSCI-China100.0,market size of the
5、 catering industry in mainland China to grow over 16%annually during 2012-2015E,which implies vast market potential for CDC.CDC has identified South China and East China as its strategic areas for thenear future.We believe that it would achieve the goal of opening 200 outletsin South China in 2014E,
6、and the FY2013-FY2015E CAGR of revenue fromthe mainland market would approach 30%.A short-term cost shock is likely and long-term impact can beminimized gradually.Leverage effect resulting from high cost rate and lownet margin makes the net profit vulnerable to cost shocks in the short run.CDC can r
7、aise menu price,build food processing centres and transferbusiness to mainland China to ensure long-term profitability.Potential risks.Lower-than-expected economic growth,rising costs,slower-than-expected expansion in South China.Earning forecast,valuation and investment rating.We project thecompany
8、s diluted FY2013-2015 EPS to be HK$0.94/1.07/1.19 respectively(FY2012 EPS was HK$0.84),and the 3-year CAGR will be 13%.Valuationbased on DCF is HK$18.8 per share and is HK$23.5 by PE method.Basedon the relative PE method,we assign a target price of HK$23.5 for thecompany in 2013E,and initiate our co
9、verage with a“HOLD”rating.Investment Summary,80.060.040.020.00.0Source:Bloomberg,CSILatest Key DataMSCI-ChinaFF no of shares(mn)FF(%)FF market cap(HK$mn)52-week high/low(HK$)12M daily turnover(HK$mn)12M volatility(%)PEG 2011-13E(x)RoE avg 2011-13E(%)P/B 2012E(x)Net debt/equity 2012E(%),2220181614121
10、06,613304.852.66,828.222.85/16.98192.0716.13.76,Turnover(HKD mn)Chg(%)Net profit(HKD mn),FY20115,3339.22514,FY20125,95611.70474,FY2013E6,4878.91532,FY2014E7,23311.50604,FY2015E7,99110.47674,Performance(%)AbsoluteRel to MSCI-China,1M1(3),YTD295,12M2813,Chg(%),0.21,(7.88),12.20,13.62,11.55,EPS(HKD),0.
11、91,0.84,0.94,1.07,1.19,Major Shareholder(%),Chg(%)PER(x)OCF/Share(HKD)P/OCF(x)EV/EBITDA(x)DPS(HKD)Yield(%),0.21251.0421150.863.90,(7.88)271.2917160.622.79,12.20241.4815140.652.94,13.62211.6414130.743.34,11.55191.8012120.823.72,Wandels Investment LimitedMatthews InternationalArdley Enterprises Limite
12、dLBK Holding CorporationMMW Holding CorporationArisaig Asia Consumer Fund,15.619.006.546.295.585.06,Source:Company announcement,Bloomberg,CSI,Note:Closing prices as of Jan 16th,2013.,FY2012 stands for the period from 1 April 2011 to 31 March 2012,PricewaterhouseCoopers,IMPORTANT DISCLOSURE AT THE EN
13、D OF THIS REPORT,2,Caf de Coral Holdings(00341.HK)THE GLOBAL LEADER IN ASIAN STYLE QSRBusiness profile:Based in Hong Kong,withpresence in mainland China and North AmericaCaf de Coral Holdings Limited(SEHK:00341),founded in 1968 and listed onthe HKSE in 1986,is one of the largest Chinese style fast-f
14、ood groups.Its mainbusiness includes fast food restaurant,institutional catering,specialtyrestaurant,food processing,etc.The company owns a series of famous brandsas Caf de Coral restaurant,Asia Pacific institutional Catering,Super Congee&Noodles,Olivers Super Sandwiches,Manchu WOK,and The Spaghetti
15、House,etc.As of June 2012,the company owned 590 directly-operated and franchisedoutlets.In FY2012（from 1 April 2011 to 31 March 2012）,Hong Kong andmainland China contributed 80.3%and 16.4%to the companys total revenue,respectively.Business in North America contributed a limited amount of incomeas mo
16、st of the Manchu WOK fast dinning stores in North America arefranchised outlets.,Fig.1:Number of units under operation as of June,2012Source:Company announcement,CSI,Fig.2:Percentage of revenue for each segment in FY2012(%)Source:Company announcement,CSI.Note:FY2012 stands for the,period from 1 Apri
17、l 2011 to 31 March 2012.Financial performance:Sound operation leads tosustainable growthAs a typical family-owned enterprise,the company operated steadily andachieved a sustainable growth.From FY1990 to FY2012,the revenue andprofit attributable to the companys shareholders grew by 8.8 times and 4.8t
18、imes,at a CAGR of 10.4%and 7.4%respectively.The market value of thecompany increased by 16.7 times,while the benchmark HSI only increased by8.0 times.The companys steady operation brought long-term excess returns toinvestors.IMPORTANT DISCLOSURE AT THE END OF THIS REPORT,3,Caf de Coral Holdings(0034
19、1.HK),Fig.5:CDCs ROE maintained steady(FY1990-2012)Source:Bloomberg,CSI,Fig.6:CDCs historical market cap(FY1990-2012)Source:Bloomberg,CSI,In FY2012,the companys revenue maintained a fast growth and increased by11.7%to HK$5.956bn.However,the company also suffered a temporary profitdecline due to the
20、impact of rising food,labor and rental costs.Profitattributable to the companys shareholders dropped by 7.9%YoY to HK$474million in FY2012.,Fig.3:CDCs revenue and YOY growth(FY1990-FY2012)Source:Bloomberg,CSI,Fig.4:CDCs net profit and YOY growth(FY1990-FY2012)Source:Bloomberg,CSI,Ownership structure
21、:controlled and managed bythe Lo FamilyThe company was founded by Mr.Lo Tang Seong and the Lo family continuedto maintain the absolute control of the company afterwards.As of 30September 2012,the Lo Family owned 43.85%of CDCs shares and 7 familymembers were on the board(12 in total).The chairman of
22、the board,Mr.ChanYue Kwong,is Mr.Lo Tang Seongs son-in-law.The Chief Executive Officer,Mr.Lo Hoi Kwong,is Mr.Lo Tang Seongs son,and several other family membersare also in the senior management team.Since its IPO in 1986,the Lo familymembers has managed CDC for more than 25 years and it is expected
23、thatCDC will maintain its steady growth under the management of the Lo family.IMPORTANT DISCLOSURE AT THE END OF THIS REPORT,49,56,58,60,37,占社消总额的比重%,Output of lodging and restaurants(Rmb 100mn),YoY%,Retail Sales(Rmb(100mn),YoY%,4,Caf de Coral Holdings(00341.HK)Table 1:The Lo family owns the absolut
24、e control of CDC,DirectorsMr.Lo Tak Shing,Peter,Board PositionExecutive Director,Management PositionOperation Director,Number ofshares held89718213,Proportion ofissuedstock%15.86%,Relationshipwith thefounderGrandnephew,Age,JoinCDC in1986,Mr.Lo Hoi Chun,No,No,67880834,12.02%Nephew,72,1976,Mr.Lo Hoi K
25、wong,Sunny Executive Director,Chief Executive Officer,58315394,10.31%Son,1982,Ms.Lo Pik Ling,AnitaMr.Chan Yue Kwong,Michael,Executive DirectorChairman of the board,Groups General managerGroups Chairman,1457433912217407,2.58%Daughter2.16%Son-in law,19821984,Mr.Hui Tung Wah,Samuel,Non-Executive Direct
26、or,25837,0.01%No,57,1984,Mr.Lo Tang Seong,VictorMr.Lo Ming Shing,IanMr.Li Kwok Sing,AubreyMr.Choi Ngai Min,MichaelMr.Kwok Lam Kwong,LarryMr.Look Guy,Non-Executive DirectorNon-Executive DirectorIndependent Non-ExecutiveDirectorIndependent Non-ExecutiveDirectorIndependent Non-ExecutiveDirectorIndepend
27、ent Non-ExecutiveDirector,Founder,50600004000055000,0.89%Founder0.01%Grandnephew0.01%NoNoNoNo,9661335554,196820101984199420042009,Source:Company reports,CSI.Note:The number of shares held contains a small amount of stock options.CHINESE RESTAURANT INDUSTRY HAS HUGE GROWTH POTENTIALMarket potential f
28、or leading QSR operators is hugeDuring 2001-2011,the retail sales of the Chinese restaurant industry grew fromRmb357.2bn to Rmb2,063.5 bn,with a CAGR of 19.17%,higher than the15.46%growth rate for total retail sales of consumer goods.During the sametime,the restaurant industry retail sales as a perc
29、ent of the total retail sales ofconsumer goods also increased from 8.30%to 11.39%.Moreover,thevalue-added output of the industry of lodging and restaurants increased fromRmb240bn in 2001 to Rmb929 bn in 2011,at a real CAGR of 10.69%,higherthan the real GDP CAGR of 9.60%.,Fig.7:Retail sales and the n
30、ominal growth of Chinesecatering industry,Fig.8:Output and nominal growth of Chinese lodging andrestaurants industry,2500020000150001000050000,餐饮业零售额 亿元）Restaurant sales as%of totalretail sales of consumer goods,同比%,30%25%20%15%10%5%0%,1000080006000400020000,住宿和餐饮业增加值（亿元）,同比%14%12%10%8%6%4%2%0%,2001
31、,2003,2005,2007,2009,2011,2001,2003,2005,2007,2009,2011,Source:National Bureau of Statistics,CSI,Source:National Bureau of Statistics,CSI,.In 2010,Chinas GDP per capita was only 16%that of U.S.,and 23%that ofJapan(calculated in PPP),equal to the level of U.S.in 1950-1960 and Japan in1970-1980,when t
32、he restaurant industry in the two countries recorded over 20years of prosperity.We hold the opinion that Chinese catering industry will keepprospering for another 15-20 years.Rising household income,urbanization andmore dining-out are the three major driving forces for the future development ofIMPOR
33、TANT DISCLOSURE AT THE END OF THIS REPORT,5,Caf de Coral Holdings(00341.HK)Chinas catering industry.We estimate the market volume of Chinas cateringindustry will grow at a CAGR of 16%in the“12th five-year plan”period and themarket size will exceed RMB 3700bn in 2015E.Table 2:Estimating the market si
34、ze of Chinese catering industry(2011-2015E),Demand from rising,Demand from,Demand from,20112015CAGR Estimation,Restaurant Sales(Rmb bn),income a,urbanization b,consumption upgrade c,d=（1+a）(1+b)(1+c)-1,2011,2015E,Market size,12.65%,1.4%,1.55%,16%,2063.5,3736.25,Source:National Bureau of Statistics,C
35、SI estimatesAs to the sub-industry of QSR(Quick Service Restaurants),Chinese QSRindustry grew faster than the total catering industry.On the other hand,Asianstyle QSR industry has a low chain operating penetration level and there is ahuge growth potential for the leading Asian fast food chain operat
36、ors.Accordingto Euro Monitor,Chinese fast food industry grew at a CAGR of 13.9%,higherthan the FSRs(Full Service Restaurants)12.22%from 2005 to 2010.Theoutput of chained Asian style QSR only accounted for 2.33%(11.2bn/481bn)ofthe total catering industry output in 2010.In contrast,sales of the top 50
37、 fastfood companies was USD 138.5bn,accounting for 25%of the total cateringindustry sales in 2009.All these leave a big room of development for theleading Asian style QSR operators in the future.,Fig.9:Output of Chinas QSR grew faster than FSR,Fig.10:QSR industry has a low chained penetration rate,F
38、SR(RMB,bn)FSR YOY%,QSR(RMB,bn)QSR YOY%,Chained QSR（RMB,bn）Chained pernetration rate%,QSR（RMB,bn),20001500,20%15%,600500,10.57%,11.33%,12.08%,12.61%,12.73%,13.10%,14.00%12.00%,10005000,2005 2006 2007 2008 2009 2010,10%5%0%,4003002001000,284.930.12005,313.235.52006,356.943.12007,423.553.42008,470.559.
39、92009,545.671.52010,10.00%8.00%6.00%4.00%2.00%0.00%,Source:Euromonitor,CSIFig.11:Chinese Asian style QSR industry is extremely lowchained(Revenue,RMB,bn),Source:Euromonitor,CSI note:fast food including Chinese and westernfast food,bakery,fast food offered by convenience store,ice-cream andetc.Fig.12
40、:Western style QSR has higher chained penetrationrate in China(Revenue,RMB,bn),Asian Sty le QSRChained operation rate%,Chained Asian Sty le QSR,Western Sty le QSRChain operation rate%,Chained Western Sty le QSR,600500400300200,1.75%,1.89%,2.02%,2.16%,2.24%,2.33%,2.50%2.00%1.50%1.00%,706050403020,95.
41、6%23.7,95.9%28,96.6%34.2,96.8%42.1,96.7%46.7,97.2%55.6,97.5%97.0%96.5%96.0%95.5%,100,4.5,5.3,6.4,8.1,9.3,11.2,0.50%,10,95.0%,0,0.00%,0,94.5%,2005,2006,2007,2008,2009,2010,2005,2006,2007,2008,2009,2010,Source:Euromonitor,CSI,Source:Euromonitor,CSI,Guangdong Province,a prime market for CDCs future bus
42、iness,is Chinaslargest province in terms of economic size,with high urban residents incomeand urbanization rate.The restaurant retail sales in Guangdong is also amongthe top ones in China.As of 2011,the GDP and GDP per capita in GuangdongIMPORTANT DISCLOSURE AT THE END OF THIS REPORT,2002,2003,2004,
43、2005,2006,2007,2008,2009,2010,2011,2002,2003,2004,2005,2006,2007,2008,2009,2010,2011,8,6,8,9,2,3,1,6,Caf de Coral Holdings(00341.HK)Province were RMB5.57 trillion and RMB50,295 respectively ranking No.1 andNo.8 among the 33 provinces/Autonomous Region/Municipalities in China.Theurban residents dispo
44、sal income in Guangdong was RMB23,898,higher thanthe average level in China(RMB21,810).As of the end of 2011,theurbanization rate was 66.5%(much higher than 50%of the country)and urbanpopulation was 69.86mn in Guangdong.The growth of economy andhousehold income in Guangdong Province are the key driv
45、ers for the rapidgrowth of the restaurant market in the region.In the past 10 years,the CAGR ofrestaurant retail sales in Guangdong was 14.17%and the restaurant retailsales in 2011 was RMB218.73bn,accounting for over 10%of the countrys totalrestaurant retail sales.We expect the CAGR of restaurant re
46、tail sales inGuangdong to be higher than 10%in the next four years.The Caf de Coral restaurants and Spaghetti House of the company are mainlylocated in Guangdong Province.As of end-June 2012,89 restaurants wereopened in a number of major cities of the province,which were more developed(in terms of G
47、DP per capita)compared to many other Chinese cities.Highconsumption power of urban residents in these cities has created a big marketfor the leading fast food chain operators.,Fig.13:Restaurant retail sales in Guangdong Province and%of the countrys total salesRetail Sales of Restaurant Industry in G
48、uangdongNorminal YOY%As a percentage of Chinas restaurant industry,Fig.14:Urban residents disposal income and consumptionexpenditure in Guangdong ProvinceUrban disposible household incom e per capita(RMB)Consumption expenditures per capita(RMB)Real YOY%,25002000150010005000Source:Guangdong Bureau of
49、 Statistics,CSI.,25%20%15%10%5%0%Note:hotel sales are,300002500020000150001000050000Source:Guangdong Bureau of Statistics,CSI.,14%12%10%8%6%4%2%0%,excluded in 2002-2008.Table 3:The key cities in South China(Guangdong Province)are relatively more developed(2010)Number of,Cities,Caf de Coral,GDP per c
50、apita rank(2010),GDP（RMB100mn）,Number of Residents(1,000）,GDP per capita(RMB),Chains,Shenzhen,22,9510.91,1035.79,91822.76,GuangzhouFoshanZhuhaiZhongshanDongguanHuizhouJiangmenZhaoqing,2214,10121436468699149,10604.485638.471202.581826.324246.251729.901550.371065.90,1270.08719.43156.02312.09822.02459.
