Monday, December 23, 2013

Seeking Alpha: Very Little Seems Expected Of Lianhua Supermarket

How to value publicly-traded companies is a question where you will get multiple answers. I am generally a big fan of discounted cash flow models, while others prefer to look at EBITDA, book value, or PE ratios. I mention this because I think how you approach the valuation question will go a long way toward determining whether you see opportunity in China's Lianhua Supermarket (0980.HK) (OTC:LHUAY).

I don't think anybody will argue that Lianhua is a particularly outstanding retailer, particularly as the market reacted quite favorably to some recent changes in the company's management. I'm not sold on the franchise model for supermarkets over the long run, and the company is going to have to deal with quite a lot of competition in its core markets of Shanghai, Zhejiang, and Jiangsu. If you value Lianhua by its earnings per share, I can agree that there wouldn't seem to be much potential here, but if you look at the cash flow the picture changes quite significantly and Lianhua could yet be undervalued.

Continue reading here:
Very Little Seems Expected Of Lianhua Supermarket

No comments: