WEBVTT 1 00:00:08.685 --> 00:00:11.315 Hello and welcome to this Vidcast, which is devoted 2 00:00:11.315 --> 00:00:15.115 to a company whose logo is a round snowman. 3 00:00:15.895 --> 00:00:19.795 The snowman has a crown and a head, so it is a king 4 00:00:20.375 --> 00:00:21.795 and a king has a scepter. 5 00:00:21.955 --> 00:00:24.955 A scepter is in the right hand of the snowman 6 00:00:25.255 --> 00:00:26.395 and it's a nice cream. 7 00:00:27.135 --> 00:00:30.715 In fact, this person is a king of Hane snow. 8 00:00:31.105 --> 00:00:32.955 Hane snow is the English translation 9 00:00:33.495 --> 00:00:35.155 of the name of a Chinese company. 10 00:00:35.765 --> 00:00:40.235 Misre. Why talk about mwe? 11 00:00:40.425 --> 00:00:45.195 Because just a few days ago, the 3rd of March, 2025, 12 00:00:45.495 --> 00:00:46.675 the company went public. 13 00:00:47.135 --> 00:00:49.475 It was listed in the Hong Kong stock exchange, 14 00:00:49.825 --> 00:00:52.515 very well known for the Hong San Index 15 00:00:53.095 --> 00:00:54.635 and it was a tremendous success. 16 00:00:55.215 --> 00:01:00.075 The stock price initially was 202.5 Hong Kong 17 00:01:00.075 --> 00:01:02.955 dollars, which is about 28 US dollars. 18 00:01:03.775 --> 00:01:06.755 For the first year of listing, the stock price went up 19 00:01:06.775 --> 00:01:11.355 by 43%, reaching 290 Hong Kong dollars. 20 00:01:11.375 --> 00:01:12.395 At the end of the first day 21 00:01:12.395 --> 00:01:15.275 of listing the market capitalization is then 22 00:01:16.035 --> 00:01:17.155 14 billion US dollars. 23 00:01:17.175 --> 00:01:18.835 So it's quite significant company, 24 00:01:19.535 --> 00:01:22.275 but what is absolutely mind blowing is 25 00:01:22.275 --> 00:01:26.515 that the offer was subscribed 5,258 times. 26 00:01:26.975 --> 00:01:30.195 So the demand was stratospheric against the offer. 27 00:01:30.625 --> 00:01:31.955 It's by the way, quite curious 28 00:01:31.955 --> 00:01:35.755 that the stock price went up only by 43%. 29 00:01:36.575 --> 00:01:39.875 Now, why is the company extremely successful 30 00:01:39.935 --> 00:01:41.755 and highly demanding on stock market? 31 00:01:41.985 --> 00:01:43.755 Because it's a company which is growing, 32 00:01:44.215 --> 00:01:45.635 the revenues are growing 33 00:01:46.295 --> 00:01:49.315 and the growth is not realized at the expense of performance 34 00:01:49.315 --> 00:01:53.395 because in net income, the bottom line represents 16% 35 00:01:53.495 --> 00:01:55.155 of sales of revenues. 36 00:01:55.415 --> 00:01:57.475 So it is a company which is growing 37 00:01:58.055 --> 00:02:01.905 and performing with such metrics. 38 00:02:02.445 --> 00:02:05.665 One could expect that this company is in a AI business, 39 00:02:05.855 --> 00:02:07.905 data centers cloud or whatsoever. 40 00:02:09.145 --> 00:02:13.145 Absolutely not. It is just selling sparkling tea, 41 00:02:13.755 --> 00:02:15.985 refreshing drinks, ice cream, 42 00:02:16.045 --> 00:02:20.665 and at a very, very low price, less than a US D, 43 00:02:21.365 --> 00:02:24.865 closer to one, rein B, the Chinese Yuan. 44 00:02:25.165 --> 00:02:27.265 And we are going to discuss the marketing 45 00:02:27.405 --> 00:02:30.585 and commercial strategy of the company in the next slide. 46 00:02:32.535 --> 00:02:36.725 Definitely the timing of the IPO was absolutely excellent, 47 00:02:36.995 --> 00:02:39.885 extremely favorable stock market conditions. 48 00:02:40.425 --> 00:02:42.685 If you look at the last 12 months of the Hong 49 00:02:43.145 --> 00:02:46.765 and you compare that with a NASDAQ over the first 50 00:02:47.425 --> 00:02:52.045 11 months, the trend was quite the same, more volatility 51 00:02:52.185 --> 00:02:55.605 for the Hong, but basically over 11 months, 52 00:02:56.155 --> 00:03:00.165 both stock prices, stock market index went up by 20%. 53 00:03:00.945 --> 00:03:02.605 But if you look at the last months, 54 00:03:02.985 --> 00:03:07.445 the Hong made an additional 20% when when Nasdaq was down 55 00:03:07.545 --> 00:03:09.445 by about 13%. 56 00:03:10.105 --> 00:03:13.285 So definitely the Hong Kong market is doing quite well. 57 00:03:13.785 --> 00:03:14.925 And in addition to that, 58 00:03:15.135 --> 00:03:19.205 there is another company operating roughly the same industry 59 00:03:19.505 --> 00:03:23.565 as booming, which went public in February. 60 00:03:23.825 --> 00:03:24.965 So quite recently 61 00:03:25.265 --> 00:03:29.765 and since the IPO, the stock price went uh by 23%. 62 00:03:30.145 --> 00:03:32.325 So definitely the market isn't the demand 63 00:03:32.345 --> 00:03:34.165 for this kind of stocks. 64 00:03:36.375 --> 00:03:39.005 Let's go back to the story of mbe. 65 00:03:39.425 --> 00:03:41.885 The company was created in 1997 66 00:03:42.545 --> 00:03:46.925 and during six years the company just failed at opening 67 00:03:47.225 --> 00:03:49.245 stores which were successful. 68 00:03:49.745 --> 00:03:52.085 It was about opening and closing. 69 00:03:52.825 --> 00:03:54.045 In 2003, 70 00:03:54.425 --> 00:03:58.325 the company makes its first successful localization, 71 00:03:58.715 --> 00:04:00.245 then it becomes sustainable. 72 00:04:00.745 --> 00:04:04.845 In 2005, the company is producing its signature product, 73 00:04:05.225 --> 00:04:09.205 the ice cream at one Chinese Yuan one Ren mibi, 74 00:04:09.255 --> 00:04:12.405 which represents 14 US cents. 75 00:04:12.745 --> 00:04:14.045 So it's quite low cost 76 00:04:14.305 --> 00:04:16.245 and it's going to become extremely popular. 77 00:04:17.025 --> 00:04:20.245 Now the day you want to develop your business, you have 78 00:04:20.245 --> 00:04:22.005 to go through franchise. 79 00:04:22.475 --> 00:04:24.765 Franchise is a fantastic lever 80 00:04:25.145 --> 00:04:29.085 for developing sites at the speed of light in 2007, 81 00:04:29.385 --> 00:04:31.565 the start the franchise activity. 82 00:04:32.665 --> 00:04:36.085 Now the question is what do you offer to the franchisees? 83 00:04:36.665 --> 00:04:39.045 The answer is raw materials, which are produced 84 00:04:39.045 --> 00:04:43.805 by the company and in 2012 the company started production 85 00:04:43.805 --> 00:04:46.805 manufacturing facilities in Han in order 86 00:04:46.945 --> 00:04:50.645 to sell raw material for franchisees franchises. 87 00:04:51.505 --> 00:04:56.085 And then the development accelerated In 2020, the number 88 00:04:56.265 --> 00:05:00.205 of stores reaches the outstanding level of 10,000 89 00:05:00.745 --> 00:05:03.165 and the company is opening its first store 90 00:05:03.715 --> 00:05:05.725 outside China in Indonesia. 91 00:05:06.705 --> 00:05:09.725 Now in the 31st of December, 2024, 92 00:05:09.815 --> 00:05:14.205 there are 46,479 93 00:05:14.425 --> 00:05:17.325 stores, which is an outstanding commercial 94 00:05:17.475 --> 00:05:21.265 development an 3rd of March. 95 00:05:21.525 --> 00:05:23.385 So the there's a company is listed, 96 00:05:24.165 --> 00:05:26.345 the Wall Street Journal headline is, 97 00:05:26.885 --> 00:05:28.545 forget about McDonald's, 98 00:05:29.255 --> 00:05:32.745 this Chinese fast food chain is now the world's biggest. 99 00:05:33.365 --> 00:05:37.465 And that's absolutely true in terms of number of sites. 100 00:05:38.245 --> 00:05:40.585 If you look at the evolution of worldwide stores 101 00:05:40.685 --> 00:05:42.785 for a number of companies, mwe, 102 00:05:42.805 --> 00:05:45.945 but competitors such as McDonald's, Starbucks 103 00:05:46.085 --> 00:05:48.785 and Subway, it's absolutely mind blowing. 104 00:05:49.565 --> 00:05:54.065 So basically as far as McDonald's is concerned, from 2019 105 00:05:54.125 --> 00:05:56.625 to 2024, the number of stores 106 00:05:56.685 --> 00:05:59.725 of locations is about less than 40,000 to 107 00:06:00.245 --> 00:06:01.725 a bit more than 40,000. 108 00:06:02.435 --> 00:06:06.725 What about Starbucks from 30 to 40,000, subway 109 00:06:07.315 --> 00:06:12.165 down from 40,000 to 35,000 plus, and what about me? 110 00:06:12.185 --> 00:06:15.205 Way from less than 10,000 111 00:06:15.705 --> 00:06:17.965 to more than 46,000. 112 00:06:18.425 --> 00:06:20.645 So in terms of number of points of sales, 113 00:06:20.995 --> 00:06:22.885 it's absolutely outstanding. 114 00:06:23.545 --> 00:06:27.885 Now forget about McDonald's is simply a journalist punchline 115 00:06:27.885 --> 00:06:30.605 because the rest of the metrics is slightly different. 116 00:06:30.825 --> 00:06:32.845 We are going to look at that in the next slide. 117 00:06:35.305 --> 00:06:37.315 What is a business model of me? 118 00:06:38.315 --> 00:06:40.595 I already mentioned that the company is selling 119 00:06:41.175 --> 00:06:43.875 low price products, which were quite consistent 120 00:06:43.875 --> 00:06:46.875 with the purchasing power of the consumers. 121 00:06:47.695 --> 00:06:48.835 The purchasing power 122 00:06:48.855 --> 00:06:52.355 of the consumers in China is a little bit different from one 123 00:06:52.555 --> 00:06:54.635 area to the other and a number of people 124 00:06:54.865 --> 00:06:56.675 with low income are happy 125 00:06:56.895 --> 00:07:00.075 to buy high quality products with low price. 126 00:07:00.775 --> 00:07:03.515 In order to develop the business as quickly as possible, 127 00:07:03.575 --> 00:07:07.755 the company decided to franchise massive appeal to franchise 128 00:07:08.215 --> 00:07:10.995 and I will develop below the relationship 129 00:07:10.995 --> 00:07:12.875 between and the franchisees. 130 00:07:13.615 --> 00:07:17.435 But basically the revenues are not coming from royalties 131 00:07:17.625 --> 00:07:18.795 paid by the franchises, 132 00:07:18.855 --> 00:07:22.075 but by manufacturing the raw materials which are going 133 00:07:22.075 --> 00:07:23.355 to be sold to franchises 134 00:07:23.495 --> 00:07:25.315 and transformed into end product, 135 00:07:25.935 --> 00:07:29.795 the company is still predominantly a Chinese company 136 00:07:29.905 --> 00:07:33.875 operating in China with 80% of the revenues. 137 00:07:34.255 --> 00:07:35.715 But you remember what I said, 138 00:07:35.805 --> 00:07:37.355 there was an opening in Indonesia 139 00:07:37.855 --> 00:07:40.315 and the company wants to go for progressive 140 00:07:40.615 --> 00:07:42.995 and sustained international development. 141 00:07:43.335 --> 00:07:46.675 So the company wants to grow abroad overseas 142 00:07:46.695 --> 00:07:51.235 and it can count on one of the very important strengths 143 00:07:51.235 --> 00:07:53.795 of the company, operational excellence, 144 00:07:54.245 --> 00:07:55.715 excellence in manufacturing 145 00:07:56.255 --> 00:07:58.435 and excellence in the supply chain. 146 00:07:58.735 --> 00:08:02.235 The quality of execution is transforming the strategy 147 00:08:02.235 --> 00:08:04.155 of the company into financial success. 148 00:08:06.405 --> 00:08:08.635 Let's describe a little bit now the company 149 00:08:09.015 --> 00:08:10.115 in financial terms. 150 00:08:10.775 --> 00:08:12.635 We have the IPO prospectus 151 00:08:12.975 --> 00:08:15.435 and we have figures for the last 12 months 152 00:08:16.135 --> 00:08:18.475 before September, 2024, 153 00:08:19.575 --> 00:08:21.915 income $3.3 billion. 154 00:08:22.415 --> 00:08:26.795 So 23.6 billion Chinese yuan. 155 00:08:27.455 --> 00:08:29.155 That's not a very big company 156 00:08:29.575 --> 00:08:32.155 and when we compare with McDonald's, maybe the number 157 00:08:32.155 --> 00:08:33.355 of sites is larger, 158 00:08:33.855 --> 00:08:35.715 but the revenues are not exactly 159 00:08:35.815 --> 00:08:37.395 of the same order of magnitude. 160 00:08:38.175 --> 00:08:42.795 But what is mind blowing is gross plus 16% compared 161 00:08:42.815 --> 00:08:44.435 to 12 months before. 162 00:08:45.385 --> 00:08:49.835 Well, that's quite good, but the gross is not accelerating. 163 00:08:49.935 --> 00:08:51.075 In fact, it's slowing down. 164 00:08:51.095 --> 00:08:55.445 The revenues had doubled from 2021 to 2023. 165 00:08:55.505 --> 00:08:58.045 So there's a little bit of slowing down the growth 166 00:08:58.345 --> 00:09:00.325 and this is why now the company wants 167 00:09:00.325 --> 00:09:03.045 to get the resources in order to accelerate the growth. 168 00:09:03.825 --> 00:09:05.205 The company is profitable. 169 00:09:05.385 --> 00:09:09.725 The operating income, the EBIT represents 23% of revenues 170 00:09:09.915 --> 00:09:12.485 with 5.4 billion yuan 171 00:09:13.305 --> 00:09:15.285 and the return on capital employed, 172 00:09:15.285 --> 00:09:17.685 which is definitely the performance indicator, is 173 00:09:18.365 --> 00:09:21.725 absolutely stratospheric with 65%. 174 00:09:22.265 --> 00:09:25.645 So the company is immensely profitable, it's growing 175 00:09:26.105 --> 00:09:27.885 and it wants to accelerate its growth. 176 00:09:28.145 --> 00:09:31.525 The consequence of its operating income is an earning 177 00:09:31.645 --> 00:09:34.045 income, which is about $600 million 178 00:09:34.475 --> 00:09:37.085 with 4.2 billion yuan. 179 00:09:37.465 --> 00:09:39.445 So the company is profitable, 180 00:09:41.405 --> 00:09:44.465 but the question is, is the company profitable enough 181 00:09:44.485 --> 00:09:45.585 to finance his growth? 182 00:09:46.045 --> 00:09:49.065 And how is this performance perceived by the market? 183 00:09:50.045 --> 00:09:51.425 How do you finance your growth? 184 00:09:51.425 --> 00:09:52.785 Growth is organ and growth 185 00:09:52.815 --> 00:09:57.025 with capital expenditures 1.5 billion Chinese Iran 186 00:09:57.525 --> 00:10:01.345 and it's financed by EBITDA by far, by the EBITDA 187 00:10:01.375 --> 00:10:03.145 with 5.8 billion. 188 00:10:03.805 --> 00:10:05.825 So the company is generating an ebitda, 189 00:10:05.825 --> 00:10:10.225 which is almost four times its industrial investments now 190 00:10:10.225 --> 00:10:12.545 as a company is generating a high strong, 191 00:10:12.905 --> 00:10:15.665 positive free cash flow, it's a accumulating cash 192 00:10:16.525 --> 00:10:18.105 not returning to the shareholders, 193 00:10:18.485 --> 00:10:20.145 but piling up cash in order 194 00:10:20.165 --> 00:10:21.945 to finance the growth in the future. 195 00:10:22.565 --> 00:10:26.305 The cash net of financial debt of the company is 5.8 billion 196 00:10:27.065 --> 00:10:29.865 re mibi, so it's a one year of ebitda. 197 00:10:30.565 --> 00:10:34.425 The company is quite conservative in its financial strategy 198 00:10:34.645 --> 00:10:38.905 and its cash rich in order again to finance future growth. 199 00:10:39.845 --> 00:10:42.025 Now, how is it appraised by the market? 200 00:10:42.575 --> 00:10:44.265 There's a very well known multiple, 201 00:10:44.265 --> 00:10:48.625 which is enterprise value divided by ebitda 16 times 202 00:10:49.285 --> 00:10:52.025 and 16 is a high figure, which is a consequence 203 00:10:52.025 --> 00:10:54.545 of a company which is perceived as a high gross 204 00:10:54.805 --> 00:10:56.305 and high performing company 205 00:10:57.095 --> 00:10:59.425 with about stock market credibility, 206 00:11:00.265 --> 00:11:02.505 relative value creation, we very often knew the market 207 00:11:02.645 --> 00:11:05.025 to book dividing the enterprise value 208 00:11:05.065 --> 00:11:06.985 by the capital employee, the value 209 00:11:06.985 --> 00:11:09.745 of the business operations divided by the amount 210 00:11:09.745 --> 00:11:11.545 of money invested in business operations. 211 00:11:11.605 --> 00:11:14.105 And it's 12, which means that each 212 00:11:14.125 --> 00:11:16.345 and every REN mibi invested in 213 00:11:16.865 --> 00:11:19.105 business operations has been transforming to 12 214 00:11:20.055 --> 00:11:21.065 MBIs of value. 215 00:11:21.765 --> 00:11:24.105 The price to book is sometimes used. 216 00:11:24.155 --> 00:11:26.025 Price to book is market capitalization 217 00:11:26.025 --> 00:11:27.545 divided by book equity. 218 00:11:28.135 --> 00:11:30.705 It's roughly the same rationality as the market to book, 219 00:11:30.705 --> 00:11:33.145 but the market to book is much better in terms 220 00:11:33.145 --> 00:11:34.425 of financial analysis. 221 00:11:34.435 --> 00:11:37.025 Still the price to book is seven. 222 00:11:37.555 --> 00:11:40.945 Again, its value creation for the equity holders. 223 00:11:41.725 --> 00:11:44.665 As a conclusion, strong stock market credibility, 224 00:11:44.665 --> 00:11:48.345 definitely very high multiples, which is consistent 225 00:11:48.455 --> 00:11:50.225 with the performance which is very high 226 00:11:50.485 --> 00:11:52.185 and the growth, which is very promising. 227 00:11:54.665 --> 00:11:57.085 Now as it was suggested by the Wall Street Journal, 228 00:11:57.415 --> 00:12:00.245 let's compare McDonald's and me way 229 00:12:00.245 --> 00:12:02.765 because they are supposedly of the same size, 230 00:12:03.105 --> 00:12:05.205 at least in terms of number of stores. 231 00:12:06.065 --> 00:12:09.325 In my opinion, these two companies are not really comparable 232 00:12:09.595 --> 00:12:12.045 because it don't operate on the same market 233 00:12:12.385 --> 00:12:14.765 and they don't operate on the same business model 234 00:12:14.835 --> 00:12:16.205 with the same kind of product. 235 00:12:16.665 --> 00:12:18.245 But it's still quite interesting 236 00:12:18.345 --> 00:12:20.605 to benchmark the financial metrics. 237 00:12:21.705 --> 00:12:26.405 You remember mwe $3.3 billion growing revenues, 238 00:12:26.785 --> 00:12:29.365 Magnus 26 billion, much larger 239 00:12:30.105 --> 00:12:32.485 but stable return on sales. 240 00:12:32.715 --> 00:12:37.485 EBIT operating income represents 23% of revenues at MWE 241 00:12:37.905 --> 00:12:40.845 and 45% for McDonalds. 242 00:12:41.385 --> 00:12:44.485 That's a very big difference, which is due to the fact that 243 00:12:45.325 --> 00:12:50.005 MWE makes Monet selling raw materials when McDonald's makes 244 00:12:50.015 --> 00:12:54.125 money cashing in royalties, which are basically 245 00:12:54.755 --> 00:12:56.045 real estate royalties. 246 00:12:56.285 --> 00:12:58.325 I will elaborate on this point a little bit later. 247 00:12:59.065 --> 00:13:01.085 And real estate means what by the way, it means 248 00:13:01.085 --> 00:13:03.165 that the Rosie of McDonald is much less 249 00:13:03.165 --> 00:13:04.245 than the return on sales. 250 00:13:04.505 --> 00:13:06.205 The company's capital intensive 251 00:13:06.205 --> 00:13:08.445 because it's about Relay State. 252 00:13:08.825 --> 00:13:12.405 Now about mwe, the rose is about three times as much 253 00:13:12.405 --> 00:13:15.245 as a return on sales, which is the assets productivity 254 00:13:15.425 --> 00:13:17.725 of the company, the company's manufacturing, 255 00:13:18.105 --> 00:13:20.965 but it's not a very capital intensive business. 256 00:13:21.665 --> 00:13:25.245 Now in terms of market capitalization, MWE is promising 257 00:13:25.555 --> 00:13:27.205 with 14 billion us, 258 00:13:27.225 --> 00:13:31.885 but McDonald's is a giant with more than $200 billion 259 00:13:31.905 --> 00:13:32.925 of market cap. 260 00:13:34.245 --> 00:13:35.605 Interestingly, the enterprise value 261 00:13:35.625 --> 00:13:37.845 of EBITDA is roughly of the same size. 262 00:13:38.545 --> 00:13:40.085 Me sway is about 16 263 00:13:40.595 --> 00:13:43.605 with a higher rose than McDonald's 264 00:13:43.905 --> 00:13:46.525 and with more growth than mag don's. 265 00:13:46.525 --> 00:13:49.405 So you would expect that the enterprise value is lower worth 266 00:13:49.485 --> 00:13:51.645 macdonna, which is absolutely not the case. 267 00:13:52.195 --> 00:13:56.245 It's 19. So you understand that there's maybe a potential 268 00:13:56.305 --> 00:13:59.805 for growth in terms of me phase profitability, 269 00:14:00.035 --> 00:14:04.965 capital performance, the last not least ratio is a market 270 00:14:04.985 --> 00:14:09.325 to book enterprise value divided by capital employed 12 271 00:14:09.505 --> 00:14:12.845 for Mishu and only six for McDonalds. 272 00:14:13.305 --> 00:14:15.165 And it probably comes from the fact 273 00:14:15.165 --> 00:14:17.085 that the company is a capital intensive 274 00:14:17.355 --> 00:14:19.325 because of relay state. 275 00:14:21.535 --> 00:14:23.875 Of course what makes a difference between McDonald's 276 00:14:23.875 --> 00:14:27.755 and Mishu is not the number of sites, it's the size, size 277 00:14:27.755 --> 00:14:30.155 of revenues, market cap and so on and so forth. 278 00:14:30.815 --> 00:14:33.595 But there's another difference which is quite interesting. 279 00:14:33.855 --> 00:14:36.155 It comes from again the assets turnover. 280 00:14:36.695 --> 00:14:39.235 The assets turnover is bought. Three four ue. 281 00:14:39.975 --> 00:14:43.755 UE is producing manufacturing raw materials which are sold 282 00:14:43.755 --> 00:14:46.875 to the franchisees and transformed into finished product. 283 00:14:47.625 --> 00:14:48.995 It's light manufacturing. 284 00:14:49.175 --> 00:14:50.915 So the assets turnover is about three 285 00:14:51.695 --> 00:14:53.005 again, about McDonald's. 286 00:14:53.065 --> 00:14:54.645 The company is about real estate. 287 00:14:55.605 --> 00:14:59.725 McDonald's owns about 70% of its restaurant site, land 288 00:14:59.985 --> 00:15:04.045 and building and additional restaurants are owned building 289 00:15:04.345 --> 00:15:08.005 not the land long-term leasehold agreement with a landlord. 290 00:15:08.145 --> 00:15:11.445 But at the end of the day it's a real a state company which 291 00:15:11.445 --> 00:15:15.205 explains the high return on sales, the very low assets, 292 00:15:15.565 --> 00:15:18.685 turnover, and other metrics such as a market capitalization, 293 00:15:18.785 --> 00:15:21.445 the value of the building plus the value of the services 294 00:15:22.065 --> 00:15:24.645 and the enterprise value over a capital employed, 295 00:15:24.695 --> 00:15:26.805 which is significantly lower 296 00:15:27.155 --> 00:15:30.725 because the assets turnover is significantly lower. 297 00:15:33.235 --> 00:15:35.655 Now it's difficult to compare McDonald's and UE 298 00:15:35.655 --> 00:15:37.015 because one is really a state. 299 00:15:37.075 --> 00:15:38.295 The other one is manufacturing, 300 00:15:38.485 --> 00:15:41.495 even though there are some similarities in terms 301 00:15:41.495 --> 00:15:42.535 of business operations. 302 00:15:42.535 --> 00:15:46.855 So it could be interesting to compare UE with other company, 303 00:15:46.855 --> 00:15:49.895 company fast food, but with no relay state. 304 00:15:50.235 --> 00:15:51.415 The answer is Starbucks. 305 00:15:51.875 --> 00:15:54.375 Of course Starbucks is much bigger than me way 306 00:15:54.605 --> 00:15:57.095 with $36 billion of revenues. 307 00:15:57.395 --> 00:16:00.055 You remember McDonald's only 26 billion 308 00:16:00.435 --> 00:16:02.375 and me way is 3.3 billion. 309 00:16:02.835 --> 00:16:04.215 So Starbucks is much bigger, 310 00:16:04.635 --> 00:16:07.255 but at Starbucks there's no relay estate at all. 311 00:16:07.915 --> 00:16:10.135 No point of sale is owned by the company. 312 00:16:10.995 --> 00:16:15.935 The return on sales is 14% at Starbucks on 23% at Mewa. 313 00:16:16.075 --> 00:16:18.935 So Mewa is quite profitable as far 314 00:16:18.935 --> 00:16:20.135 as the p and l is concerned. 315 00:16:20.435 --> 00:16:22.135 But what is quite interesting is 316 00:16:22.135 --> 00:16:24.175 to observe the return capital employed. 317 00:16:24.475 --> 00:16:26.495 You remember light manufacturing for 318 00:16:27.395 --> 00:16:29.695 return capital employed 65%, 319 00:16:30.275 --> 00:16:34.455 118%, 2024 for Starbucks. 320 00:16:35.155 --> 00:16:37.095 And the reason is quite mechanical 321 00:16:37.355 --> 00:16:40.375 and technical, not so much a financial reason. 322 00:16:41.155 --> 00:16:44.215 The reason is coming from a contract sign between 323 00:16:44.735 --> 00:16:45.935 Starbucks and Nestle. 324 00:16:46.495 --> 00:16:49.695 Starbucks is proposing Nestle product in the stores 325 00:16:50.595 --> 00:16:52.455 for a long-term contract. 326 00:16:53.075 --> 00:16:56.335 Now Nestle paid cash upfront the amount of money, 327 00:16:56.865 --> 00:16:58.655 which basically means that it shows 328 00:16:58.755 --> 00:17:01.815 as a liability in the balance sheet of Starbucks, 329 00:17:02.025 --> 00:17:04.855 other long term operating liabilities, 330 00:17:05.555 --> 00:17:08.975 and it's going to be progressively transformed into revenues 331 00:17:09.365 --> 00:17:10.615 year after year. 332 00:17:11.155 --> 00:17:13.335 But capital employee is technically reduced 333 00:17:13.435 --> 00:17:16.775 by this other long-term operating liability. 334 00:17:16.965 --> 00:17:20.375 This is a reason why the assets turnover is absolutely 335 00:17:20.725 --> 00:17:22.695 stratospheric at Starbucks. 336 00:17:23.325 --> 00:17:26.855 It's not a matter of operations, it's a matter of contract. 337 00:17:27.595 --> 00:17:32.495 Now the market capitalization was more than $200 billion at 338 00:17:32.735 --> 00:17:37.655 McDonald's is only quotes $121 billion at Starbucks 339 00:17:38.285 --> 00:17:41.095 with higher rose and higher revenues. 340 00:17:41.675 --> 00:17:45.175 So you understand that the relay state plays a very big role 341 00:17:45.515 --> 00:17:46.655 at McDonald's. 342 00:17:47.185 --> 00:17:49.845 Enterprise value in EBITDA is 21, 343 00:17:49.975 --> 00:17:53.405 which is supposedly a performance, yes, gross no 344 00:17:54.105 --> 00:17:57.365 and 16 at Mefe and 19 at McDonald's. 345 00:17:57.365 --> 00:18:01.085 The enterprise value over capital employed is also very 346 00:18:01.085 --> 00:18:03.365 difficult to analyze because of the contract, 347 00:18:03.365 --> 00:18:07.005 which I already mentioned, 29 for Starbucks. 348 00:18:07.545 --> 00:18:09.725 So even though you compare Starbucks 349 00:18:10.385 --> 00:18:13.725 and sway with similarities in the business operations, 350 00:18:13.725 --> 00:18:17.205 you understand that some technical aspects makes a 351 00:18:17.205 --> 00:18:20.285 comparison and the benchmarking quite difficult. 352 00:18:22.365 --> 00:18:24.385 The three companies which I mobilized in order 353 00:18:24.445 --> 00:18:26.545 to do this benchmarking exercise 354 00:18:26.765 --> 00:18:30.025 or massively use a franchise in order 355 00:18:30.045 --> 00:18:31.745 to develop their business operations, 356 00:18:32.125 --> 00:18:33.625 but the systems seem 357 00:18:33.625 --> 00:18:35.665 to be quite different from one to the other. 358 00:18:36.485 --> 00:18:38.065 As far as McDonald's is concerned, 359 00:18:38.065 --> 00:18:40.545 the companies a real estate investors also franchisees 360 00:18:40.545 --> 00:18:43.305 paying the rent for the relay estate in addition 361 00:18:43.305 --> 00:18:46.265 to royalties based on revenues and profit. 362 00:18:47.205 --> 00:18:48.825 As far as Mewa is concerned, 363 00:18:49.325 --> 00:18:51.545 we have some information in the prospectus. 364 00:18:52.245 --> 00:18:54.705 I'm quite cautious about what I'm going to say 365 00:18:54.775 --> 00:18:57.305 because it's not fully transparent, 366 00:18:57.365 --> 00:19:00.625 but you see that the franchisees are paying quite limited 367 00:19:01.255 --> 00:19:02.345 franchise fees. 368 00:19:02.645 --> 00:19:04.345 So the payment upfront made 369 00:19:04.345 --> 00:19:06.185 by the FraNChiS is quite reasonable. 370 00:19:06.935 --> 00:19:10.425 Then during the operations, low royalties, 371 00:19:11.085 --> 00:19:13.665 no royalties at the end of the day, 372 00:19:13.885 --> 00:19:16.145 the royalties which are cashed in 373 00:19:16.325 --> 00:19:20.745 by Meise from the franchisees represent only 2.4% 374 00:19:20.805 --> 00:19:22.705 of Meise revenues. 375 00:19:23.765 --> 00:19:25.665 In addition to that, for the franchisees, 376 00:19:25.925 --> 00:19:29.425 the initial investment, the initial CapEx are quite reduced. 377 00:19:30.135 --> 00:19:31.665 It's not very capital intensive 378 00:19:31.765 --> 00:19:34.145 to transform the raw materials into ice creams 379 00:19:34.445 --> 00:19:35.625 and sparkling teas. 380 00:19:36.125 --> 00:19:38.825 So definitely Meise does not make the Monet 381 00:19:38.825 --> 00:19:40.425 with the franchisees. 382 00:19:41.085 --> 00:19:42.465 In terms of royalties 383 00:19:42.525 --> 00:19:45.625 and payments upfront, the revenue generation 384 00:19:45.765 --> 00:19:47.345 for Mease come from where 385 00:19:47.965 --> 00:19:52.345 it comes from selling the road materials to the franchisees. 386 00:19:54.595 --> 00:19:56.415 So as far as McDonald's 387 00:19:56.415 --> 00:19:58.415 and Mease are concerned, we are in front 388 00:19:58.415 --> 00:20:00.815 of two extremely differentiated 389 00:20:01.165 --> 00:20:02.935 franchise and p and l models. 390 00:20:04.375 --> 00:20:08.375 McDonald's is really a estate company which owns 70% 391 00:20:08.375 --> 00:20:13.335 of the sites, more than 70% if you include the restaurants 392 00:20:13.475 --> 00:20:16.335 for which McDonald's owns a building and not the land. 393 00:20:17.195 --> 00:20:19.895 So what happened, the franchises are using the premise 394 00:20:20.115 --> 00:20:22.935 and they are paying the rent in addition to the rent. 395 00:20:22.935 --> 00:20:26.415 They're paying royalties for the marketing support which is 396 00:20:26.655 --> 00:20:28.935 provided by McDonald's and so on and so forth. 397 00:20:29.555 --> 00:20:32.815 But basically the business consists in generating enough 398 00:20:32.815 --> 00:20:36.775 revenue so that McDonald's can repay the loan, 399 00:20:37.195 --> 00:20:38.335 repair the mortgage, 400 00:20:38.715 --> 00:20:42.295 and at the end of the day generate capital gains in the real 401 00:20:42.355 --> 00:20:44.175 estate investment business. 402 00:20:44.965 --> 00:20:46.015 What about mwe? 403 00:20:46.325 --> 00:20:47.445 It's about producing, 404 00:20:47.875 --> 00:20:50.885 producing raw materials which are transformed 405 00:20:51.545 --> 00:20:52.805 by the franchisees, 406 00:20:53.225 --> 00:20:56.085 but the franchisees are not paying so much upfront. 407 00:20:56.085 --> 00:21:00.165 There is no barrier to entry as far as finance is concerned. 408 00:21:00.825 --> 00:21:04.165 So basically they are paying of course in terms 409 00:21:04.165 --> 00:21:05.805 of industrial margins. 410 00:21:06.225 --> 00:21:08.765 So they are buying the raw materials and it's bread 411 00:21:08.865 --> 00:21:10.125 and butter for mwe. 412 00:21:12.025 --> 00:21:13.155 What is very interesting 413 00:21:13.155 --> 00:21:15.155 to understand when you compare these three companies 414 00:21:15.825 --> 00:21:18.915 that it's not only the size which is differentiating them, 415 00:21:19.105 --> 00:21:21.715 it's not only the franchise system which is differentiating, 416 00:21:21.715 --> 00:21:23.675 it's also the financial strategy. 417 00:21:24.775 --> 00:21:28.235 You remember that is generating an ebitda, which 418 00:21:28.375 --> 00:21:30.515 by far pays a capital expenditure. 419 00:21:30.515 --> 00:21:34.395 So the free cash flow is strong, is positive, is high. 420 00:21:35.065 --> 00:21:37.555 It's the same story for McDonald's and Starbucks, 421 00:21:37.575 --> 00:21:39.275 but what do McDonald's 422 00:21:39.275 --> 00:21:41.195 and Starbucks do with their free cash flow? 423 00:21:41.665 --> 00:21:43.275 They buy back their shares. 424 00:21:43.935 --> 00:21:46.235 So at the end of the day we are in a situation where 425 00:21:46.295 --> 00:21:47.795 for both McDonald's 426 00:21:47.795 --> 00:21:51.515 and Starbucks, the book equity is negative. 427 00:21:51.875 --> 00:21:55.555 Shareholders equity is what was invested by shareholders 428 00:21:55.555 --> 00:21:59.155 through capital, through additional paying capital on 429 00:21:59.155 --> 00:22:02.155 what they reinvested through retain earnings minus 430 00:22:03.035 --> 00:22:05.315 treasury stock and treasury stock. 431 00:22:05.315 --> 00:22:06.755 It's about the market value 432 00:22:06.895 --> 00:22:09.315 of the shares which we have bought back by the company. 433 00:22:09.815 --> 00:22:11.755 The rest is about book value of the shares 434 00:22:12.055 --> 00:22:13.355 and at the market value 435 00:22:13.455 --> 00:22:15.995 by far exceed the book value of the shares. 436 00:22:16.835 --> 00:22:19.875 Mechanically, the shareholders equity turns negative 437 00:22:20.415 --> 00:22:22.195 for McDonald's and Starbucks, not 438 00:22:22.195 --> 00:22:24.555 because they generated losses, it's 439 00:22:24.555 --> 00:22:25.915 because they generated plenty 440 00:22:25.975 --> 00:22:28.155 of profit transforming into cash 441 00:22:28.455 --> 00:22:31.555 and return to the shareholders through shares buy back. 442 00:22:31.935 --> 00:22:34.835 The equity is negative by $4 billion 443 00:22:34.855 --> 00:22:39.395 for McDonald's when the debt is positive by $51 billion, 444 00:22:40.125 --> 00:22:41.875 51 compare with four. 445 00:22:42.175 --> 00:22:45.155 It looks big, but the market capitalization 446 00:22:45.155 --> 00:22:48.955 of McDonald's you remember is more than $200 billion. 447 00:22:49.015 --> 00:22:53.115 Though no problem for the bankers is a different story 448 00:22:53.185 --> 00:22:55.875 because the company's growing McDonald's 449 00:22:55.875 --> 00:22:59.435 and Starbucks are not that much growing, so they don't have 450 00:22:59.435 --> 00:23:02.515 to reinvest their financial resources in the growth. 451 00:23:02.855 --> 00:23:07.315 So as they don't reinvest, they return has to prepare 452 00:23:07.335 --> 00:23:10.235 for growth, they want to grow at a higher rate, they want 453 00:23:10.235 --> 00:23:12.075 to grow abroad, it's going to consume a lot 454 00:23:12.075 --> 00:23:13.355 of financial resources. 455 00:23:13.625 --> 00:23:15.475 This is why they have to retain the cash. 456 00:23:15.865 --> 00:23:18.875 They have plenty of cash in the balance sheet at the end 457 00:23:18.875 --> 00:23:22.755 of 2024, $800 million compared with equity 458 00:23:22.855 --> 00:23:23.915 of $2 billion. 459 00:23:24.615 --> 00:23:26.315 And it is before the IPO. 460 00:23:26.335 --> 00:23:29.555 The IPO is going to add an additional $400 million 461 00:23:29.775 --> 00:23:31.275 to the cash situation of the company. 462 00:23:31.935 --> 00:23:33.115 The company wants to grow. 463 00:23:33.415 --> 00:23:36.675 You need to have plenty of financial cash, 464 00:23:36.865 --> 00:23:39.795 financial resources in your bank account the day 465 00:23:39.795 --> 00:23:40.915 you want to go for growth. 466 00:23:43.455 --> 00:23:45.925 You have observed that the EBITDA generated by 467 00:23:46.645 --> 00:23:49.285 represents about four times its capital expenditures. 468 00:23:49.745 --> 00:23:51.725 So the free cash flow is strongly positive. 469 00:23:52.385 --> 00:23:54.165 The company is growing. Generally speaking, 470 00:23:54.165 --> 00:23:56.525 when you grow you need financial resources. 471 00:23:56.865 --> 00:23:59.445 But when the free cash flow is strongly positive, 472 00:23:59.825 --> 00:24:03.725 you don't need to visit the capital market is you New shares 473 00:24:03.785 --> 00:24:05.805 and dute, the initial founders. 474 00:24:06.635 --> 00:24:09.205 This is why sources Crunchbase. 475 00:24:09.495 --> 00:24:13.285 There was only one unique fundraising in the history 476 00:24:13.285 --> 00:24:16.005 of the company 2021 series A 477 00:24:16.005 --> 00:24:18.125 and there was no series B of any kind. 478 00:24:18.585 --> 00:24:22.965 2 billion Es, which is about $280 million 479 00:24:23.625 --> 00:24:25.765 at the primo evaluation of 18 billion. 480 00:24:25.985 --> 00:24:27.965 So $2.5 billion, 481 00:24:28.625 --> 00:24:31.845 2.5 plus 0.3 is about $2.8 billion. 482 00:24:32.745 --> 00:24:34.805 For the investors who participated 483 00:24:34.905 --> 00:24:36.485 to this unique fundraising. 484 00:24:36.485 --> 00:24:40.245 In 2021 IPO 2025, 485 00:24:41.265 --> 00:24:44.645 MWE took this opportunity in order to raise new funds, 486 00:24:45.185 --> 00:24:47.405 add additional cash on the pile of cash 487 00:24:47.505 --> 00:24:51.205 of 800,000,444 million. 488 00:24:51.265 --> 00:24:53.205 So today they have 1.2 plus 489 00:24:53.985 --> 00:24:55.845 and for the shareholders quite good news because 490 00:24:55.845 --> 00:24:59.645 after two trading days the market cap is 14 billion. 491 00:25:00.265 --> 00:25:03.885 You can compare that with a two $2.8 billion 492 00:25:04.425 --> 00:25:05.645 in 2021. 493 00:25:05.705 --> 00:25:08.805 So only four years ago shareholders are happy. 494 00:25:11.005 --> 00:25:13.905 It looks like all green lights for me. 495 00:25:14.735 --> 00:25:18.825 Revenue gross, number of side gross, plenty 496 00:25:18.845 --> 00:25:20.625 of cash in the bank account, high rose, 497 00:25:20.885 --> 00:25:22.705 strong stock market credibility. 498 00:25:23.605 --> 00:25:26.825 But there is still an issue, which is a little bit pending. 499 00:25:27.405 --> 00:25:30.665 The franchise system is extremely decentralized. 500 00:25:31.325 --> 00:25:32.785 As a consequence there's no 501 00:25:32.805 --> 00:25:35.825 or little central quality control. 502 00:25:36.965 --> 00:25:40.225 Of course there's a strong impact in terms of cost. 503 00:25:40.325 --> 00:25:41.465 You reduce your cost 504 00:25:41.465 --> 00:25:43.705 because there's no quality control cost. 505 00:25:44.095 --> 00:25:45.185 It's good for the p and l. 506 00:25:45.565 --> 00:25:48.985 The competitor SHU has decided to go 507 00:25:48.985 --> 00:25:50.905 for a centralized quality control. 508 00:25:51.965 --> 00:25:56.265 SHU is more premium, is more China chic as they say. 509 00:25:56.685 --> 00:25:58.305 And of course it's very expensive 510 00:25:58.325 --> 00:26:00.185 to centralize the quality control, 511 00:26:00.685 --> 00:26:03.185 but it's probably bad for the p and l 512 00:26:03.245 --> 00:26:05.185 and a little bit better for the sustainability. 513 00:26:06.155 --> 00:26:09.905 There have been some franchisees at which were not 514 00:26:09.905 --> 00:26:11.745 that serious about food safety. 515 00:26:11.875 --> 00:26:13.665 There were health problems 516 00:26:14.285 --> 00:26:17.105 and health problems can be very much at the detriment 517 00:26:17.105 --> 00:26:18.145 of your sustainability 518 00:26:18.445 --> 00:26:20.785 and certainly your reputation capital. 519 00:26:21.685 --> 00:26:23.225 That's a negative side of it. 520 00:26:23.445 --> 00:26:26.065 The positive side is when it's decentralized, 521 00:26:26.445 --> 00:26:29.585 it can be a huge adaptation to local conditions 522 00:26:30.285 --> 00:26:32.505 and that was a great lever. 523 00:26:32.975 --> 00:26:34.545 When Covid happened. 524 00:26:34.805 --> 00:26:38.025 The company was very much covid resilient, 525 00:26:38.555 --> 00:26:39.945 which is absolutely great 526 00:26:39.945 --> 00:26:44.325 because it went through the pandemic, keep pointing on you, 527 00:26:44.325 --> 00:26:46.965 increasing the number of stores which were open. 528 00:26:47.385 --> 00:26:49.845 You remember the story about stores opening. 529 00:26:50.385 --> 00:26:52.405 So it's quite different from McDonald's, 530 00:26:52.405 --> 00:26:54.565 which is extremely serious about quality. 531 00:26:55.425 --> 00:26:58.365 Um, the impact is in the return on sales certainly, 532 00:26:58.865 --> 00:27:01.605 but there's also an impact in the sustainability, 533 00:27:01.695 --> 00:27:05.165 which might be an issue in the long term for mwe. 534 00:27:06.885 --> 00:27:08.865 As a matter of conclusion, we can say 535 00:27:08.865 --> 00:27:12.225 that MWE is definitely a growth story. 536 00:27:13.125 --> 00:27:14.785 The company is characterized 537 00:27:14.965 --> 00:27:19.105 by operational excellence in manufacturing, in supply chain, 538 00:27:19.645 --> 00:27:21.705 in the relationship with the franchisees, 539 00:27:21.725 --> 00:27:23.425 in the openings of the store, et cetera. 540 00:27:23.685 --> 00:27:25.345 And financial prudence. 541 00:27:25.725 --> 00:27:28.785 The company is extremely conservative in its financial 542 00:27:29.105 --> 00:27:31.545 strategy, which is extremely good news, 543 00:27:32.285 --> 00:27:35.665 but the company has very much decentralized its business. 544 00:27:36.685 --> 00:27:40.785 Is it sustainable when the size is growing, when the number 545 00:27:40.805 --> 00:27:44.625 of stores is going to increase very much when you go abroad, 546 00:27:44.695 --> 00:27:47.225 when you go into different environments? 547 00:27:47.645 --> 00:27:48.825 Can you decentralize? 548 00:27:49.285 --> 00:27:52.265 Are you forced to introduce a little bit of control, 549 00:27:52.295 --> 00:27:56.265 centralized control in the business, then at the expense 550 00:27:56.325 --> 00:27:58.505 of growth, at the expense of p and l, 551 00:27:58.925 --> 00:28:02.185 but for the benefit of sustainability, this is 552 00:28:02.185 --> 00:28:04.025 what we are going to observe in the future. 553 00:28:04.455 --> 00:28:06.705 Keeping on the benchmarking exercise 554 00:28:06.705 --> 00:28:09.865 between sway on one side and McDonald 555 00:28:10.005 --> 00:28:12.985 and Starbucks on the other hand, thank you very much.