Not yet, it is still on my watchlist. When I did my due diligence I stumbled upon its younger brother as mentioned in the reference at the end of the article. I want to look at that company first before making any decision.
I will link to this article in my "Emerging Market Links + The Week Ahead (February 19, 2024)" post for latter today. Rollup strategies are always hard to execute though or can run into problems like what happened with SCI + in China, there is the risk that the govt will restrict "wasteful spending" on funerals, etc or do the sort of clampdown they did on education in the name of fairness or something... Also, I thought during covid there were cases of people receiving the wrong ashes back etc etc from the govt - so there is a risk if the company gets sloppy and all it takes is one case getting lots of Weibo attention...
Thanks! I get the feeling that FSU tries it best to work with the government to make sure they are aligned. But, that's more of an impression based on the articles I've read...
Hi. Do you know if the sale of land is forever or is it a lease? In my country you do not take ownership, but instead enter a fixed term lease. If it's indeed sold, terminal value multiple might not make sense, as they would run out of inventory. Does the firm have any recurring revenue? Anyway, great article!
I have a section ("What Will Happen When Land Use Rights Start to Decay and Run Out?") in this article mentioning what is starting to happen in Singapore with HDB flats:
My guess is that cemetery land is for 50 years in China BUT nobody knows what will happen in China when the land leases expire (hard to see the Chinese government wanting to destroy cemeteries as that would cause protests...) BUT we do know what happens to lease values as the leases decay... We have had controversies in Malaysia over Hindu temples, Christian schools, and cemeteries on valuable leased land that developers want...
Thank you. Excellent article you've written by the way. When it comes to cemetaries, even in Europe, there is a finite lifespan. At my local cemetary, they destroyed 1/3rd of the graves because too old,(80 years) too costly to maintain. In the long term, the value of the land could become an issue.
Thank you. Great question! What I have read is that in China, you never 'own' the land. You buy a 'land use right' for a fixed number of years. Beyond this period, for a fee, it has to be renewed. There is an exception however for certain land owned by Fu Shou Yuan. The fee is not applicable. When they sell a burial plot to someone, they sell the 'use right' typically for a period between 20 and 70 years. Here's the reference where you can find more information: https://timetocompound.wordpress.com/2018/03/19/fu-shou-yuan-1448-hk-property-developer-with-80-gross-margins/
Did you end up buying Fu Shou or passed in the end?
Not yet, it is still on my watchlist. When I did my due diligence I stumbled upon its younger brother as mentioned in the reference at the end of the article. I want to look at that company first before making any decision.
I will link to this article in my "Emerging Market Links + The Week Ahead (February 19, 2024)" post for latter today. Rollup strategies are always hard to execute though or can run into problems like what happened with SCI + in China, there is the risk that the govt will restrict "wasteful spending" on funerals, etc or do the sort of clampdown they did on education in the name of fairness or something... Also, I thought during covid there were cases of people receiving the wrong ashes back etc etc from the govt - so there is a risk if the company gets sloppy and all it takes is one case getting lots of Weibo attention...
But I do think its a very interesting stock!
Thanks! I get the feeling that FSU tries it best to work with the government to make sure they are aligned. But, that's more of an impression based on the articles I've read...
Hi. Do you know if the sale of land is forever or is it a lease? In my country you do not take ownership, but instead enter a fixed term lease. If it's indeed sold, terminal value multiple might not make sense, as they would run out of inventory. Does the firm have any recurring revenue? Anyway, great article!
I have a section ("What Will Happen When Land Use Rights Start to Decay and Run Out?") in this article mentioning what is starting to happen in Singapore with HDB flats:
https://emergingmarketskeptic.substack.com/p/chinas-problems-that-few-people-talk-about
My guess is that cemetery land is for 50 years in China BUT nobody knows what will happen in China when the land leases expire (hard to see the Chinese government wanting to destroy cemeteries as that would cause protests...) BUT we do know what happens to lease values as the leases decay... We have had controversies in Malaysia over Hindu temples, Christian schools, and cemeteries on valuable leased land that developers want...
Thank you. Excellent article you've written by the way. When it comes to cemetaries, even in Europe, there is a finite lifespan. At my local cemetary, they destroyed 1/3rd of the graves because too old,(80 years) too costly to maintain. In the long term, the value of the land could become an issue.
Thank you. Great question! What I have read is that in China, you never 'own' the land. You buy a 'land use right' for a fixed number of years. Beyond this period, for a fee, it has to be renewed. There is an exception however for certain land owned by Fu Shou Yuan. The fee is not applicable. When they sell a burial plot to someone, they sell the 'use right' typically for a period between 20 and 70 years. Here's the reference where you can find more information: https://timetocompound.wordpress.com/2018/03/19/fu-shou-yuan-1448-hk-property-developer-with-80-gross-margins/