Bottom line: Qunar’s new airline investment is unlikely to offset its shrinking access to tickets from major airlines, while Ctrip’s new purchase of a strategic stake in Uzai.com extends its strategy to eliminate competitors through such tie-ups.
Ctrip invests in Uzai.com
China’s rapidly consolidating travel services sector is taking an interesting new twist onto the runway, with word that number-two website Qunar (Nasdaq: QUNR) is joining a group launching a new airline. At the same time, separate media reports are saying that industry industry leader Ctrip(Nasdaq: CTRP) has just neutered another rival using its recent approach of buying a strategic stake in the company.
Both of these stories point to the growing clout of Ctrip and Qunar, which were once bitter rivals but became a de facto single company last year after a landmark equity tie-up. I have long called for consolidation in China’s highly fragmented travel services sector, but now sense that Ctrip is looking increasingly like a monopoly after its recent buying spree that has seen it buy up strategic stakes in most of its major rivals. Read Full Post…
Bottom line: Baidu’s shares could see some upside through the rest of the year if it executes on reported plans to spin off its money-losing businesses, while NetEase could post lackluster performance unless it gets more aggressive in M&A.
Baidu stock jumps after results
Two of China’s top Internet companies have just released their latest quarterly results that both look pretty good, even though investor reaction was quite different to the latest financials from leading search engine Baidu (Nasdaq: BIDU) and NetEase (Nasdaq: NTES), China’s second largest game operator. Baidu’s shares jumped 11 percent in after-hours trade after the release of its latest results that largely continued recent trends, while NetEase’s shares plunged 15 percent after its results came out.
In both instances, investors seem to be focused on the company’s financial strategy going forward rather than actual numbers in their latest reports. In the case of Baidu, investors are eagerly awaiting execution of a plan that will reportedly see the company spin off many of its newer non-search businesses that are losing big money. In the case of NetEase, investors may be disappointed that the company has been a non-player in China’s Internet M&A scene, even though it has quite a lot of cash in its coffers. Read Full Post…
Bottom line: Xiaomi’s new Mi 5 model is likely to get a tepid reception due to its lateness to market and a fading corporate image, and the company’s valuation is likely to shrink when it returns to market later this year for new funding.
Xiaomi rolls out Mi 5
If faltering smartphone sensation Xiaomi is still in business a decade from now, 2015 could well go down as a “lost year” when the company’s sales slowed sharply as its image for making cool, affordable products took a beating. A major factor behind the sudden stall was Xiaomi’s failure last year to release a new fifth generation of smartphones, which were supposed to power sales in the second half. (previous post)
Now Xiaomi is trying to play catch-up with the unveiling of its Mi 5 more than half a year after its originally intended launch date. (English article; Chinese article) It’s probably far too early to say if the Mi 5, along with another new model called the 4S, will be enough to revive Xiaomi’s fading fortunes. But I suspect the damage has already been done, and this new model will ultimately fail to find a big audience due to its late arrival to a fast-moving smartphone market where half a year is really equal to an eternity. Read Full Post…
Bottom line: China Southern’s new move to stop offering heavily discounted tickets through travel agents looks aimed at the growing clout of Ctrip, and other carriers could follow with similar policies.
China Southern takes aim at Ctrip
China’s largest airline has joined a growing uprising against increasingly dominant online travel agent Ctrip(Nasdaq: CTRP), with reports that China Southern (HKEx: 1055; Shanghai: 600029) will no longer offer its most heavily discounted tickets via third-party agents. The actual move will see China Southern offer tickets with discounts of 60 percent or more only on its own website.
The move is the latest by travel products and services providers who are unhappy with Ctrip’s growing clout in the market, following a string of deals last year that saw the company purchase strategic stakes in most of its major rivals. Since that has happened, a growing number of hotels, airlines and other travel services companies have complained they are getting squeezed by a group including Ctrip and its partners, whose position looks increasingly like a monopoly. Read Full Post…
Bottom line: Tencent’s sharp focus, strong management and savvy strategic tie-ups make it China’s best Internet investment for the long term, though its shares may feel some short-term pressure due to high valuation.
Tencent builds empire on SNS
This week the series on my favorite Chinese stocks takes us to the “Big 3” of Baidu (Nasdaq: BIDU), Alibaba(NYSE: BABA) and Tencent(HKEx: 700) , sometimes called the BAT super trio because they’re the country’s biggest Internet companies by quite a large margin. I’ll end the suspense right away by saying my favorite among these 3 is Tencent, the only one that’s listed in Hong Kong.
I’ll look briefly soon at some financials comparing this trio, but will openly admit my Tencent attraction is less based on market fundamentals and instead is tied to its corporate personality that differs quite a bit from the others. These “personalities” are a direct reflection of each company’s founder, since all 3 are relatively young and the founder of each is still quite clearly in charge. Read Full Post…
Bottom line: New complaints about deceptive and unfair practices by short seller Andrew Left and online cosmetics seller Jumei have some validity, but such actions are ultimately just forms of normal market behavior.
Jumei under fire for low offer
A couple of headlines are shining a spotlight on the recent wave of privatizations and an older flurry of short-seller attacks involving offshore-listed Chinese companies, amid accusations of unfair practices and market manipulation. One headline has Hong Kong’s securities regulator bringing a case against notorious short seller Andrew Left and his company, Citron Research, claiming they knowingly published false information about locally listed Chinese real estate developer Evergrande (HKEx: 3333). The other is seeing several smaller US fund managers protest the low value of a new privatization offer for online cosmetics seller Jumei International (NYSE: JMEI).
These cases share the common theme that each is market driven, and thus each seems perfectly acceptable. Short sellers are famous for issuing misleading information in a bid to drive down a company’s share price, but can only succeed if other investors believe them. Similarly, most of the privatization offers for Chinese companies over the last year offer healthy premiums to the latest trading prices, even if those prices are down sharply from earlier IPO levels. Read Full Post…
Bottom line: Meituan-Dianping’s IPO is likely to raise more than $2 billion and should get a strong reception when it comes, most likely by mid-year in New York, while ZTO Express’ $1-$2 billion IPO will get a cooler reception due to its steep losses.
Meituan-Dianping eyes IPO
After a quiet start to the year, the market for offshore Chinese IPOs is slowing coming to life with word of 2 listing plans that should both top the $1 billion mark. One would see leading group buying site Meituan-Dianping list, most likely in New York or possibly Hong Kong, in a deal that would probably raise at least $2 billion. The second is also Internet-related, and would see parcel delivery giant ZTO Express also raise up to $2 billion in a New York IPO.
Perhaps not surprisingly, both of these companies are losing money despite their position as industry leaders. That’s because competition has been cut-throat in both spaces, especially in the parcel delivery business that supports China’s booming e-commerce sector. Meituan and Dianping were also locked in heated competition before they merged late last year to face the current company, which still faces stiff competition from 2 of China’s leading Internet companies, Baidu(Nasdaq: BIDU) and Alibaba (NYSE: BABA). Read Full Post…
Bottom line: Canadian Solar’s Recurrent Energy unit is likely to make its first public filing for a New York IPO in the next 2 weeks and should get a positive reception, while Jumei is likely to quietly de-list from the US in the next 3-4 months.
Recurrent Energy gets big new financing
One of the few Chinese IPOs likely to happen in New York this year is moving closer to the launch gate, with word of major new financing for the power plant-building unit of solar panel maker Canadian Solar (Nasdaq: CSIQ). But while that IPO for Recurrent Energy moves closer to the IPO gate, announcement of a new privatization bid for online cosmetics seller Jumei International (NYSE: JMEI) is far more typical for the market these days.
This pair of stories reflect a growing new reality for US-listed Chinese companies. That reality is seeing some of China’s leading private companies choose New York for their listings, banking on interest from global investors seeking to buy into the China growth story. At the same time, many smaller lesser-known Chinese companies listed in New York have discovered US investors are far less interested in their stories, and are privatizing with plans to re-list and hopefully get higher valuations back in China. Read Full Post…
Bottom line: Alibaba is likely to enter talks to buy a strategic stake in Groupon or even make a bid for the entire company, following its disclosure that it has purchased 5.6 percent of the US company in the open market.
Alibaba buys Groupon stake
What exactly was leading Chinese e-commerce company Alibaba (NYSE: BABA) thinking when it quietly purchased 5.6 percent of Groupon (Nasdaq: GRPN) shares on the open market without informing the faded US group buying pioneer? That’s the question that will be making the rounds this week, following the surprise disclosure of Alibaba’s purchase that Groupon only learned about through a regulatory filing.
Of course the most intriguing possibility is that Alibaba could be weighing a bid to acquire Groupon completely, which wouldn’t be that preposterous for reasons I’ll explain shortly. Other media are putting a less aggressive spin on the move, saying that Alibaba simply hopes to learn from Groupon’s group buying skills that first propelled it to fame about 6 years ago. Read Full Post…
Bottom line: A new integrated car-ordering platform being rolled out by Lyft and Didi looks like a smart and low-cost move to expand their geographic reach, while LeEco’s electric car venture with Aston Martin is likely to sputter.
Lyft co-founder John Zimmer in Beijing for Didi announcement
Two of China’s top Internet companies are in car-related headlines today, led by a rapidly cozying relationship between Didi Kuaidi and US counterpart Lyft that has the pair preparing to roll out a joint platform for their signature hired car services. The other news has online video giant LeEco (Shenzhen: 300104), formerly known as LeTV, rolling out a joint venture to make electric cars with super luxury brand Aston Martin.
Both of these deals are incremental, since the original Didi-Lyft partnership was formed last year when the former invested in the latter. Likewise, LeEco was rumored to be near a tie-up with Aston Martin as early as last April. From a broader perspective, both moves show a growing confluence between the Internet and cars, which has opened up a wide range of new services that often incorporate GPS technology. Read Full Post…
Bottom line: Tencent would be wise to roll back a newly announced money-transferring fee on WeChat following state-media criticism, which could indicate a tougher stance by Beijing due to the platform’s increasingly dominant position.
Xinhua calls WeChat a catfish
It’s been quite a while since the last tussle between China’s influential central media and its vibrant private sector, so I was amused to read of a new flare-up in that regard after Tencent(HKEx: 700) said it would start charging fees for a money-transferring service on its popular WeChat platform. This looming flare-up has seen the state-run Xinhua news agency, often considered the voice of Beijing, criticize WeChat’s move as “excessive goose plucking”, which is quite a vivid description and certainly not too complimentary.
This particular assault is somewhat noteworthy, as it hearkens back to another similarly high-profile spat involving Tencent and WeChat 3 years ago. That tussle came as WeChat was beginning its meteoric rise, and saw leading telco China Mobile (HKEx: 941; NYSE: CHL) accuse the service of stealing its traditional SMS text messaging service. Tencent insisted at that time that WeChat would always remain free, defying China Mobile pressure to charge for the service and then divide the fees between the 2 sides. (previous post) Read Full Post…
