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Curves Holdings (7085 JP)

Spin-off & COVID-19 recovery combo at 10x normalized EV/EBIT

Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Curves Holdings at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only - not a recommendation to buy or sell shares.

Curves Holdings (7085 JP - US$407 million) is a Japanese fitness chain that dominates the niche of serving elderly women. It was part of karaoke bar operator Koshidaka before being spun off in 2020. It has about 2,000 locations in Japan, most of which are franchisees that pay royalties to Curves.

Curves Fitness was invented by Americans Gary and Diane Heavin of Waco, Texas in 1992. In the early 2000s, Koshidaka executive Takeshi Masumoto travelled to the United States, was impressed by the fitness chain, and wanted to bring the concept to Japan.

In the following 20 years, he built a Japan franchisee operation for Curves. In 2018, eventually acquired the global franchisor that controls most markets outside of the United States and Oceania. And finally, Koshidaka spun off Curves in 2020, hoping it would flourish as a stand-alone entity.

Unfortunately, this was right before Japan entered a COVID-19 lockdown that decimated the demand for fitness services. The number of club memberships fell from 822,000 to just 600,000.

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