What if I told you that I found a company trading at a 2x earnings multiple and offering a greater-than-50% shareholder yield based on its FY25 distributions?
And who would have guessed, it’s a Chinese company!
The stock is down a staggering 70% from its prior high. At first glance, the numbers appear enticing, but the story is admittedly a little more complex.
While earnings are expected to compress in the short term, there’s a compelling argument that if you look beyond the immediate quarterly turbulence (largely driven by macro factors the company cannot control), the long-term potential could offer attractive rewards. This company’s model is undergoing a significant shift: it’s aiming to become more capital-light, targeting higher-quality users, and is about to pursue international expansion ambitions. And while there are challenges, its low valuation, aggressive capital returns, and unique positioning make it a case worth exploring.
In this piece, I’ll dive into why, despite the near-term pressures, this stock could be a hidden gem.
Keep reading to discover if this opportunity warrants your attention.
High-Level Thesis: “Bam Bam Bam Bam Bam”-90 Second-Hypothesis
As always, we kick things off with Bill Miller’s “pitch framework.” Miller famously said that successful portfolio managers have ultra-short attention spans. When pitching a stock, you need to be punchy, data-driven, and get straight to the point. In the spirit of Peter Lynch’s egg timer challenge, where analysts had just 90 seconds to pitch a stock, I’m going to give you the essential pitch for this company in rapid-fire fashion:
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