Bottom line: China Southern’s removal of its air tickets from Qunar represents the latest boycott by a major supplier, and will further deprive Qunar of a key revenue source, causing its losses to further widen.
China Southern dumps Qunar
The bumpy ride for China’s online travel services sector continues this week, with word that leading airline China Southern (HKEx: 1055; Shanghai: 600029) is withdrawing all of its tickets from Qunar (Nasdaq: QUNR) due to a high volume of customer complaints. China Southern is just the latest airline to make such a move on Qunar’s site, following in the path of rivals Air China (HKEx: 753; Shanghai: 601111) and Hainan Airlines (Shanghai: 600221).
This particular series of boycotts marks the latest flare-up in an increasingly tense relationship between online travel sites and the airlines and hotels that are their biggest suppliers. Just last month China Southern reportedly decided to withhold its cheapest tickets from all travel agents. And major hotel operators last year formed a group to counter the increasing clout of Qunar and Ctrip(Nasdaq: CTRP), the industry’s top 2 players that are now allies after forming a major equity tie-up last year. Read Full Post…
Bottom line: Hertz’s sale of its Car Inc stake reflects the Chinese company’s new focus on hired car services, and could see Car Inc fall into the red as its UCar affiliate vies with Uber and Didi Kuaidi in the fiercely competitive market.
Hertz dumps Car Inc
A complex transaction involving Car Inc (HKEx: 699) is making the headlines as the new week begins, reflecting a transformation from its roots as a rental car specialist into a hired car services company competing with Uber and Didi Kuaidi. The deal will see former strategic stakeholder Hertz (NYSE: HTZ) sell most of its stake in the company to UCar, Car Inc’s hired car services affiliate. At the same time, Car Inc’s chairman and one of its largest shareholders will also sell his stake in the company to UCar, which will become one of Car Inc’s biggest shareholders.
There’s no explanation for the shuffle in the announcement, but it does seem to show that Car Inc’s Chairman Charles Lu wants to move his company more quickly into the hired car services sector, which is growing faster but is also fiercely competitive. That would explain Hertz’s decision to sell its stake, since Hertz is a global rental car company that probably has little interest in China’s ultra competitive hired car services market. Read Full Post…
Bottom line: Xunlei’s performance and stock price could come under pressure over the next year due to stiff competition in China’s consolidating online video market and lack of support from struggling strategic partner Xiaomi.
Xunlei swings to quarterly loss
As rumors swirl of a potential merger between the online video services of Tencent (HKEx: 700) and Sohu (Nasdaq: SOHU), smaller rival Xunlei (Nasdaq: XNET) has just announced its latest quarterly results that show why it may be difficult for the company to remain independent in the rapidly consolidating sector. Xunlei swung to a loss in the quarter and saw its revenue contract — hardly encouraging signs for a company that’s already quite a small player in China’s fiercely competitive online video market.
The big “elephant in the room” in this instance is struggling former smartphone sensation Xiaomi, which purchased 30 percent of Xunlei around the time of its 2014 IPO for a reported price of about $200 million. Xiaomi went on to form a content distribution service with Xunlei last summer, leading me to predict that it could make an offer to buy the company outright. (previous post) Read Full Post…
Bottom line: Sohu is likely to combine its online video service with Tencent’s in an ongoing consolidation of the Chinese sector, and the tie-up could presage a Tencent-backed privatization bid for Sohu later this year.
Sohu, Tencent in video merger?
More consolidation could be coming in China’s online video sector, with word that web portal Sohu(Nasdaq: SOHU) may soon sell a major stake in its video service to social networking giant Tencent (HKEx: 700). The move would follow a similar tie-up between this pair in the online search space, and might lead some to wonder if Tencent may even be preparing an eventual bid for Sohu itself. I’ll end the suspense on that matter by saying such a sale seems unlikely, for reasons I’ll explain later. But the pair could still ultimately do more deals together
This particular tie-up would mean that China’s online video sector is firmly consolidating around the country’s 3 biggest Internet companies and a handful of others. Leading search engine Baidu (Nasdaq: BIDU) is closely associated with Qiyi.com, a leading player, while Alibaba (NYSE: BABA) last year purchased Youku Tudou, another leader. The other major player is LeEco (Shenzhen: 300104), formerly known as LeTV, and state-owned broadcasters in Shanghai and Hunan are also making big pushes into the space. Read Full Post…
Bottom line: A new rival bid for Dangdang and the long closing period for Jiayuan’s privatization reflect growing shareholder resistance to low prices being offered for Chinese companies trying to de-list from New York.
Dangdang gets rival buyout bid
A couple of new headlines reflect the growing chorus of complaints about low bid prices being made for Chinese companies privatizing from New York, led by a surprise new rival offer for former e-commerce leader Dangdang (NYSE: DANG). In the other headline, online dating site Jiayuan (Nasdaq: DATE) is finally moving closer to the New York exit door, after a year-long process that saw the company’s original buyout offer meet with stiff resistance from shareholders unhappy about the price.
The volume of protest noise against some of the most recent offers has certainly been growing, as company shareholders try to get more money for their stock in the wave of buyout offers. The most recent twist saw shareholders cry foul over a management-led buyout bid for online cosmetics seller Jumei (NYSE: JMEI) last month. (previous post) A slightly different but related development saw the founder of medical clinic operator iKang (Nasdaq: KANG) cry foul after his own bid for his company got trumped by a higher offer from an independent bidder. (previous post) Read Full Post…
Bottom line: The looming completion of buyouts for Qihoo 360 and Mindray Medical points to growing momentum for successful privatizations of other Chinese firms waiting to de-list from New York.
Qihoo, Mindray head back to China
Two of the largest in a wave of privatizations by US-listed Chinese firms have just taken big steps forward, with major new announcements from software security specialist Qihoo 360 (NYSE: QIHU) and medical device maker Mindray (NYSE: MR). One case has Qihoo announcing a formal date for a meeting where shareholders will vote on its plan to privatize the company. The other has Mindray announcing it has formally completed its own buyout plan, and has filed to have its shares de-listed from New York.
It’s quite significant that both of these plans are moving forward now, since China’s own stock markets where both Qihoo and Mindray hope to eventually re-list have been in a state of turmoil these days. That turmoil has seen the main Shanghai index tumble around 20 percent this year, and it’s quite possible that more turbulence lies ahead. Read Full Post…
Bottom line: Xiaomi is likely to need new funds around a year from now, at which time its valuation will stagnate or even come down up to 10 percent as its growth continues to slow.
Xiaomi’s Lei meets reporters at NPC
Struggling smartphone maker Xiaomi is making headlines today for what it’s NOT doing, namely planning to raise cash anytime soon. Xiaomi’s lack of cash raising plans are coming from talkative chief Lei Jun, responding to questions about whether his company has lost value since its last mega funding at the height of its meteoric rise about a year ago.
Most of the reports are focusing on Lei’s comments that Xiaomi has no plans for an IPO in the next 5 years, and also that his company has plenty of cash — more than 10 billion yuan ($1.5 billion) to be precise. Both remarks look aimed a deflecting speculation that Xiaomi might have to return to investors soon for more money, an exercise that would force it to put a new value on the company. Read Full Post…
Bottom line: Alibaba’s latest $4 billion fund-raising could signal a potential deal to buy its shares currently held by Yahoo, as both companies look to remove a distracting issue that is affecting both of their stock prices.
Alibaba eyeing Yahoo stake?
Chinese e-commerce giant Alibaba (NYSE: BABA) just can’t seem to get enough money. Despite having more than $18 billion in its coffers at the end of last year and access to billions more in credit, the company is reportedly back in talks with a group of banks to raise another $4 billion. That raises the question of why exactly it needs all this money.
Alibaba has certainly been an aggressive acquirer over the last 2 years, spending billions on a wide range of companies in industries from entertainment, to hired car and social networking services and many others. Two weeks ago the company was in yet another major M&A headline, when it disclosed it had quietly purchased more than 5 percent of faded group buying giant Groupon (Nasdaq: GRPN) in the open market. (previous post) Read Full Post…
Bottom line: Cautionary comments from Caixin and Ele.me about investments from Alibaba and its affiliates reflect a growing wariness from companies at accepting money and yielding control to the e-commerce giant.
Alibaba’s Ant invests in Caixin
The voracious Alibaba (NYSE: BABA) is in 2 new M&A headlines as we head into the end of the week, led by word that its Ant Financial affiliate was an investor in a new fund-raising round in Caixin, one of China’s best respected financial media. A second headline has take-out dining pioneer Ele.me denying reports that Alibaba, which is already one of its biggest shareholders, will devour the company completely. Instead, Ele.me is saying it will continue working closely with Alibaba’s own take-out delivery service called Koubei.
Both headlines reflect a growing resistance by founders of these companies to outright ownership by Alibaba-related companies. In the first case, Caixin was quick to issue a statement saying Ant was only one of several new investors in its new funding round. Ele.me’s case is similar, quashing earlier speculation that it would ultimately get swallowed up by its cash-rich backer. Read Full Post…
Bottom line: Vipshop looks like a strong bet due to its position as a focused e-commerce leader among consumers who are most interested in bargains and less concerned about famous brands.
Vipshop trives on bargain focus
So far this series on my favorite Chinese stocks has focused on big names like Tencent(HKEx: 700) and Fosun International (HKEx: 656), which are sector leaders with strong, focused management. But hiding behind these giants are a field of lesser-known second- and third-largest players in their sectors offering even better growth potential because they are far smaller and at an earlier stage in their development.
One such name is Vipshop (NYSE: VIPS), which has carved out a place as China’s third largest e-commerce company by honing in on shoppers who are more interested in bargains and less concerned with big-name brands. While some may call this area a niche, it’s really more of a focus since it encompasses quite a large segment of the Chinese shopping population. Read Full Post…
Bottom line: Qiyi’s new tie-up with Universal Music could presage its purchase of Baidu’s music unit, while Qihoo’s new video campaign is likely to stumble due to intense competition from existing players.
Qiyi ties with Universal Music
A couple of new reports are casting a spotlight on the rapid colonization of the video and music spaces by new media companies. The most intriguing of those has Qiyi.com, the online video site affiliated with search leader Baidu (Nasdaq: BIDU), taking a major step into the music space through a tie-up with global entertainment giant Universal Music. The second has the aggressive Qihoo 360 (NYSE: QIHU) making a late but big push into the online video space via a major new hire.
Both of these stories reflect the big challenge that private companies are now posing to traditional TV and radio stations, as they rapidly challenge a state-owned establishment that held a monopoly on China’s entertainment sector for decades. The resulting boom in video and music services has been great for consumers. But in usual Chinese fashion the explosion has sparked another cycle of hyper-competition that has pushed everyone deeply into the red, and is almost certain to end with the typical bust in a few years. Read Full Post…
