MTY operates a great business model as a franchisor that generates stable, asset light stream of cash flow, which historically used to fund acquisitions. MTY possesses a diversified portfolio targeting different niches in the restaurant industry such as pizza, Asian food, café, etc. Despite a reported revenue growth of around 3% for FY2025, the growth was primarily from a one-time recognition of unredeemed gift card balances - gift card breakage income, making the revenue and earnings appear to be stronger than expected. Excluding that special item, MTY’s revenue is basically flat year over year. In addition, same-store sales and store count growth have been quite weak in recent quarters. The good news here is MTY’s balance sheet is now in good shape and management has been active in share buyback and raising dividends at the fastest pace. Despite attractive capital returns and cheap valuation, we think MTY is cheap for a reason as growth from organic source and acquisitions remain a big concern here. We are downgrading our rating by one notch to ‘B-’ given these factors.

TVK is no longer a small-cap under-the-radar company like it was a few years ago, therefore, future deals need to be large enough to move the needle, and integration complexity could be meaningfully higher. In addition, valuation is also not as cheap as it used to, but it is still fair for a high-quality compounder, we think the market currently put a premium valuation on the company’s ability to grow through acquisitions. Though tariffs risk is there, it is manageable given the company’s diverse footprint and operating businesses. Overall, TVK continues to be a great serial acquirer in the energy sector, and we think the story of TVK as a long-term compounder is still intact, and given the consistent, opportunistic execution, we are upgrading our rating to “A-.”

SIS has experienced a long-term demographic tailwind as the vast majority of baby boomers live in private homes, driving demand for reliable, high-quality accessibility and care solutions. In recent years, the company has shifted its focus to supply-chain optimization to gain structural improvements in its cost structure and maintain competitiveness. SIS’s gross margin and operating margins have meaningfully improved because of these initiatives. We think the investment thesis in SIS as a long-term winner in the niche industrial space with a solid track record of consistent and growing dividends remains largely intact. Despite some potential headwinds due to tariff uncertainty, we think the company is executing well. We are maintaining our rating of a “B+”.