Playing to your strengths is great, but most companies won't go to the lengths that China Resources Enterprise (OTCPK:CRHKY) (291.HK) is going. Recognizing that turning around the Tesco
retail operations (and its own retailing business) was at best a
multiyear project and one that investors largely hated, and that those
efforts would limit the company's ability to build scale in food and
beverages, China Resources Enterprise announced that it will exit all
but its beer operations. This will come in the form of a sale to China
Resources Holdings and it will leave China Resources Enterprise as a
pure-play on the largest beer business in China.
This has been a
lousy call for almost two years for me, so I can't pretend I'm not
relieved to see the announcement. The beer business was always the
primary appeal of CRE to me (though I thought there was potential in the
beverages operation and long-term turnaround potential in retail) and I
do still see ongoing value in the shares for that operation. That said,
I only see about 10% upside from here and that's not enough
compensation for the risks of fiercer competition within China,
potential disappointments in demand development, and company-specific
execution challenges.
Read the full article here:
China Resources Enterprise Rebases Around Beer
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