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Best Mart 360 (2360 HK - US$235 million) is a Hong Kong retailer of leisure food with 170 outlets in Hong Kong, Macau and Mainland China. I first heard about the stock from Twitter user “Arena Man Capital” here.
You can think of Best Mart as a mix between a supermarket and a convenience store. It offers most other food, beverage and household products you might need, including grains, confectionaries, snacks, bakery products, wine, dried fruits, nuts, shampoos, etc.
The name “Best Mart 360°” refers to the company’s drive to offer the best quality at the best prices. And on my numbers, Best Mart 360 is significantly cheaper than the competition.
For example, 500 grams of almonds cost only HK$49 compared to about HK$70-80 at ParknShop and Wellcome. A Toblerone costs only HK$10 compared to HK$16-20 at local supermarkets.
It achieves these low prices by sourcing its products from the grey market — from whatever country and brand is the cheapest at any given time. Best Mart also avoids selling perishables such as fruits and vegetables, focusing instead on products with long shelf lives and lower expiry risks. Its stores are also small, thus saving on rent.
Best Mart’s Google Review scores are average, but most comments are positive, emphasizing a limited selection of products at low prices. Customers go there for wine, chocolate and snacks.
There is a leisure food competitor called 759 Store, owned by CEC International (759 HK - US$19 million), listed on the Hong Kong Stock Exchange. Its margins are weak at just 3% vs Best Mart’s 10%. The explanation is probably that 759 Store focuses exclusively on Japanese products, offers perishables that depreciate fast and doesn’t buy as much from the grey market. It also doesn’t focus as much on habit-forming products such as wine, chocolate and coffee.
Best Mart’s success is evident in its financial metrics. It earns a return on equity of 49%. Its sales per store are the highest in the industry. The payback period on a new store is less than 1 year.
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