I completed an investment idea write-up today on An-Shin Food Services Co., Ltd (“An-Shin”), a Taiwan-listed company which is the franchisee of the MOS Burger fast food outlets in Taiwan, China and Australia. MOS Burger was originally from Japan and is relatively popular in Asia. In particularly, the MOS Burger brand has more than 1,600 outlets in Japan, Taiwan, Singapore and Hong Kong.

Instead of the usual 1 pager, this write-up was expanded to 2 pages. In reality, the main content still remains on page 1, just that the historical financial figures are now on the second page. In essence, this is an opportunity that has a large margin of safety from:

  • 72.5% of market cap made up of cash and available-for-sale securities; zero debt
  • Profitable business gushing cash
  • Unjustifiably low EV/EBITDA of 1.9x compared to average private market transaction multiple of 9.8x and average listed-peers’ 14.9x

An-Shin is running a great business but it isn’t without problems. Most notably, its China operations are loss making. However, things aren’t as bad as it seems, especially since the China segment’s losses have been narrowing and cash flows have been more than healthy. It is also a relatively unknown and uncovered stock flying below the radar of institutions. With a market cap of just TWD2.44bn or about US$76mn, and its 2 largest shareholders controlling slightly over 50% of the shares outstanding, An-Shin is probably considered an obscure micro-cap without enough liquidity to attract institutions. This of course represents a potentially good opportunity for those investors  without the privilege of managing a couple hundreds of millions or billions to take a bite into An-Shin as an investment.

For the sake of jotting down my current thoughts and to keep track of how the business investment pans out, I would be comfortable with holding or adding to the position as long as:

  • Continues to generate the kind of operating and free cash flows over the past few years, which would eventually increase the ‘undervaluedness’ of the stock, as cash  holdings builds up
  • Healthy levels of dividends continue to be paid out (eg. 3% and above)
  • Losses in China continue to narrow
  • Measured store expansion pace, particularly in China and Australia

Even if one of the points does not ultimately come to fruition, it wouldn’t mean that it would be a deal breaker to the thesis behind investing in An-Shin. It would however, definitely be a red-flag that requires greater investigation to assess whether the quality of the business has deteriorated substantially.

To do your own due diligence of An-Shin’s financial statements, you can visit their investor relations website, which thankfully has English-translated versions. However, the earliest translated versions date back to 2014 while the traditional Chinese-based financial statements go further back to 2011 when An-Shin was listed. To view my write-up, you can click here.

As this write-up was completed over the Christmas holidays, I wasn’t able to put through a purchase order for the stock since the brokerages (Singapore) are only open tomorrow at the earliest. As such, I’m hoping to put through the order first thing tomorrow morning. If the last trading day’s volume of about 15,000 shares or about TWD1.1mn in value traded (US$35.1k) are of any indication, it should be sufficient for my order to hopefully be fulfilled.

Merry Christmas and a Happy New Year to all!

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