Asian McDonalds with an MK

Valued at THB 42.35 billion (US$1.4 billion), with 2012 revenues of THB 13.68 billion and profit of THB 1.90 billion, this Bangkok-based company engages in providing cheap quality fast Thai-style Suki, Thai-Chinese-style hotpot with fresh meats and vegetables through its MK Restaurant brand and Japanese food through its Yayoi brand. MK Restaurant Group, this Asian McDonalds upstart has just IPO’d on Thailand’s SET exchange this August in what was the country’s second largest capital raising transaction this year. Currently trading at THB46 (US$1.50), this stock is highly undervalued when compared to its potential Asian competitors such as McDonalds at US$97 and Yum! (operator of KFC and Pizza Hut) at US$68 per share.

Founded in 1989, MK operates 460 MK outlets and 95 Yayoi restaurants in Thailand with ventures in Japan (34 restaurants), Singapore (5 restaurants) and Vietnam (3 restaurants). MK also opened an outlet in Indonesia in September. They are using the IPO proceeds to build a food processing plant, additional outlets and repaying debt. More specifically, they are targeting opening 65 new branches in Thailand as well as 3 overseas within the next two years. Longer term, MK are hoping that their listing on the SET will enable them to tap into faster and lower funding from equity investors and the corporate bond market in order to facilitate their growth internationally as well as open up the possibility of expansion through acquisitions.

The Thai-Chinese Hotpot Experience

The company’s recent financial performance has been exemplary. It has achieved organic growth of 15% over the past five years and have demonstrated innovation by constantly launching pilot brands for development. The latest are Tenjin Tepanyaki, Sakata Ramen and Le Petit. With their restaurant priced at the lower end of the market, and competitively priced with McDonalds and KFC, they are both healthy competition and a good long-term investment. They are also attracting interest from Myanmar, where major local investors are keen to buy into the MK franchise potentially opening up a 60 million population market for the company.

With net profit margins of 15%, strong organic growth, the possibility of growth through acquisitions, and the popularity of its restaurants throughout South-East Asia and Japan, this is a company to watch as a major challenger to Western fast-food giants in the Asia-Pacific region, and who knows maybe the world one day.