I decided to pass because of (a) an oversaturated market; (b) relentless new supply because barriers to entry are low and (c) rapidly shifting consumer tastes
I’m no Chagee expert but I’ve never seen a relatively young company with such great margins and past growth and such atrocious same store sales growth this year. If they can figure out their store density there may be an investment case. And stay relevant of course.
(1) I think CHA's margins are average. Its LTM OPM of 15% is in line with peers like Auntea Jenny (14%) and ChaPanda (13%).
(2) Same store sales growth was negative not just this year, but even before IPO. In Q4'24, SSSG was -18% and it has been negative ever since.
(3) Store density is an issue. I believe competition is a bigger issue. There's too many competitors entering the industry because barriers to entry are low.
In Singapore, I already lost count of the brands: Beautea, Amatea, Molly Tea, Chi Cha San Chen, Luli Tea, ChaPanda, Cha Mulan... You get the idea
(4) You might find this interesting too:
In its Q3'25 earnings call, CHA said "The store closure rate remained low at 0.3% for 3 consecutive quarters, underscoring the health and the confidence of our franchisee partners."
For shareholders, this looks like cold comfort. It's natural that store closure rate remains low in 2025 because 73% of CHA's stores were opened between 2023 and 2024.
As CHA reported in its IPO prospectus, the terms of the leases for its teahouses generally range from 2 to 3 years.
In F&B, unprofitable stores usually continue operating until the lease term ends. This means there is a high risk that store closure rates will inch up from 2026 onwards.
Store closure rate is a lagging indicator of the health of CHA's stores.
A better indicator would be same-store-sales growth (SSSG). CHA's SSSG has been negative since Q4'24 (-18%) and deteriorated further to -28% in Q3'25.
With low barriers to entry and no signs of letup in competition, prospects of SSSG recovery is dim.
I’m no Chagee expert but I’ve never seen a relatively young company with such great margins and past growth and such atrocious same store sales growth this year. If they can figure out their store density there may be an investment case. And stay relevant of course.
Directionally Accurate,
Somehow my reply was lost. Sorry.
Here's my reply:
(1) I think CHA's margins are average. Its LTM OPM of 15% is in line with peers like Auntea Jenny (14%) and ChaPanda (13%).
(2) Same store sales growth was negative not just this year, but even before IPO. In Q4'24, SSSG was -18% and it has been negative ever since.
(3) Store density is an issue. I believe competition is a bigger issue. There's too many competitors entering the industry because barriers to entry are low.
In Singapore, I already lost count of the brands: Beautea, Amatea, Molly Tea, Chi Cha San Chen, Luli Tea, ChaPanda, Cha Mulan... You get the idea
(4) You might find this interesting too:
In its Q3'25 earnings call, CHA said "The store closure rate remained low at 0.3% for 3 consecutive quarters, underscoring the health and the confidence of our franchisee partners."
For shareholders, this looks like cold comfort. It's natural that store closure rate remains low in 2025 because 73% of CHA's stores were opened between 2023 and 2024.
As CHA reported in its IPO prospectus, the terms of the leases for its teahouses generally range from 2 to 3 years.
In F&B, unprofitable stores usually continue operating until the lease term ends. This means there is a high risk that store closure rates will inch up from 2026 onwards.
Store closure rate is a lagging indicator of the health of CHA's stores.
A better indicator would be same-store-sales growth (SSSG). CHA's SSSG has been negative since Q4'24 (-18%) and deteriorated further to -28% in Q3'25.
With low barriers to entry and no signs of letup in competition, prospects of SSSG recovery is dim.