General Meeting(3/18/2015)

Market Update

  • U.S Economy added 295000 jobs in Feb, which is well above the 240000 expected by economists
  • Unemployment rate dropped to 5.5% from 5.7% due to people dropping out of the workforce
  • Job opening in the U.S rose 2.4% in Jan to 5 million, reaching a 14 year high
  • U.S dollar recently yet again hit multiyear highs against the euro and also multiyear highs against Japanese Yen
  • Sweden’s central bank recently further cut its key policy interest rate from -0.1 to- 0.25 and expanded its bond- buying program
  • China shares climbed to near seven- year high

Business

  • Tencent’s net profit rose 50% from the same quarter last year. Profit mostly driven by online games and mobile games built on its mobile Wechat and QQ platform
  • In the 4th quarter, 82% of Tencent’s revenue was from online games, while advertising revenue only accounted for 13%

Banking Industry

Industry research general steps:

  • Business model (product& services model, revenue model)
  • Risk factor& macro environment (Top down, Bottom up)
  • Case studies on a few companies
  • Porter’s Five Forces

Types of Banks

  • Commercial banks: deposits and loans: take deposits and make high interest from loans
  • Investment Banks: underwrites stock and bond issues, trades, investment management, merger and acquisitions advisory
  • Merchant banks: provide capital for equity
  • Central banks: regulatory role, lender of last resort

2007-08 Financial& Economic Crises

  • Banking Industry Consolidation
  • Bail out and moral hazard

Post- Crisis Regulation

  • Basel Accords (recommended international standard)
  • Volcker Rule: against proprietary trading( Investment banks use their own money to invest instead of clients’ money)

CCAR (Comprehensive Capital Analysis and Review)

  • Annul stress test
  • Capital requirement
  • Cost on risk management and compliance

Trends& Opportunities

  • Mobile banking
  • Predictive banking& Customer Analytics
  • Digital and social selling
  • New product development

Shake Shack and the Fast Casual Industry

Shake Shack: a Manhattan-based burger joint

IPO: Jan 2015

  • With initial price of $21 per dollar
  • Hit &45 on the first day of its debut
  • Raised $ 105 million
  • Operates 663 restaurants, only 31 company- operated
  • Menu choices are very limited

Shake Shack’s successful IPO once again proved investors’ appetite for Fast Casual

the Fast Casual Industry

Characterized by:

  • Affordability
  • High quality ingredients: fresh
  • Convenience: fast service
  • Customization: flexible offering
  • A full view of how the food is prepared
  • Higher price as compared to Fast Food Restaurants
  • Fast Casual’s Competitiveness
  • Consumers look for best value proposition, not necessarily cheapest price
  • Emphasis on offering better product but still at an affordable price
  • Caters to a heightened interest in healthy food

Risk Factors for Shake Shack:

Competition from similar burger joints

  • The Habit restaurant
  • McDonald’s and Wendy’s innovative items and attempts at customization
  • Risk of over- expansion
  • Goal of opening 450 stores may be ambitious
  • Risk of lower profits, higher operating costs
  • Over reliance on Manhattan for rev and profit margin

Risk of Beef Cost

  • SHAK lost $1.4 million in the fourth quarter due to higher cost in beef
  • Meat from producers that adhere to more stringent welfare practices and don’t use antibiotics or hormones.