Bottom line: CICC and Jiuxian are benefiting from a growing number of domestic listing options for private Chinese companies, but both will still need to show they can be profitable industry leaders for investors to take them seriously.
Jiuxian finally debuts on China OTC
A couple of new IPOs are highlighting the growing allure of China’s increasingly diverse stock markets for domestic companies that used to flock to New York. Leading the headlines is a very respectable performance in the long-awaited Hong Kong trading debut for CICC (HKEx: 3908), China’s oldest investment bank. The strong debut came even after CICC had to scale back the offering due to weak demand, and market watchers are attributing the performance to separate news that China will resume domestic IPOs by year-end after a pause of several months.
In the other headline, online wine seller Jiuxian has become the latest Chinese Internet firm to list on the country’s 2-year-old over the counter (OTC) market. The loss-making Jiuxian had initially aimed to list in New York, but abandoned that plan for a simpler offering at home. It joined other money-losing startups making similar listings over the last week, including online classified ad site Baixing and Alibaba-backed (NYSE: BABA) soccer club Evergrande Taobao. (previous post) Read Full Post…
Bottom line: Alibaba’s Youku Tudou purchase, its investment in a US online grocery store and its spat with JD mark a return to the headlines for the company following a quiet period, as it regains confidence following a piracy scandal early this year.
Alibaba invests in US online grocer
E-commerce leader Alibaba (NYSE: BABA) may have briefly gone into headline hibernation over the summer when its stock was in free-fall, but it’s quickly returning to a more familiar hyperactive mode as its Singles Day shopping extravaganza approaches this week. The company is in at least 2 M&A headlines as we head into the new week, announcing its signing of a formal deal to buy leading online video site Youku Tudou (NYSE: YOKU) and reportedly nearing a deal to make a relatively big investment in a US online grocery site called Boxed.
Meantime, a recent spat between Alibaba and archrival JD.com(Nasdaq: JD) continues to make headlines just 2 days before Singles Day, which falls on November 11 and has rapidly grown to become the world’s busiest online shopping day. That spat burst into headlines last week and revolves around anti-competitive accusations made by JD, which has now also sued Alibaba for allegedly making inflated claims about its delivery service. Read Full Post…
Bottom line: China’s commerce regulator is putting growing pressure on Alibaba to play by its rules governing piracy and fair competition, but is likely to keep dialogue private to avoid public spats like one early this year.
SAIC accepts JD’s Alibaba complaint
E-commerce juggernaut Alibaba (NYSE: BABA) is coming uncomfortably under the microscope just days before its important Singles Day shopping extravaganza, with 2 new developments reflecting growing scrutiny from the nation’s top commerce regulator. The first has the powerful State Administration for Industry and Commerce (SAIC) formally accepting a complaint from rival JD.com (Nasdaq: JD), which accuses Alibaba of strong-arm tactics aimed at stifling competition during Singles Day promotions set for November 11.
The second headline looks a bit more benign, and simply says that SAIC Minister Zhang Mao visited Alibaba’s headquarters in the city of Hangzhou in coastal Zhejiang province this week. Headlines from that meeting look designed to show a facade of harmony, with Zhang praising Alibaba for its innovation in e-commerce. But I do suspect that Zhang is strongly pushing Alibaba behind the scenes to clean up its sites of traffic in pirated and substandard products, and also to avoid abusing its market dominance that led to the JD.com complaint. Read Full Post…
Bottom line: The latest spat between Alibaba and JD over behind-the-scenes strong-arm tactics will quickly subside following JD’s filing of a formal complaint, as both come under government pressure to clean up their sites of counterfeit goods.
JD accuses Alibaba of strong-arm tactics
In what’s quickly becoming an annual ritual of fall, a war of words has broken out between e-commerce leaders Alibaba(NYSE: BABA) and JD.com(Nasdaq: JD) in the run-up to China’s November 11 Singles Day, the world’s biggest online spending extravaganza. This year JD has accused its larger rival of pressuring third-party online merchants to limit their Singles Day promotions to Alibaba’s own websites, effectively freezing out other sites like JD’s where those same merchants may also operate other online stores.
At the same time, Alibaba, JD and their many smaller e-commerce peers are coming under fire from a new Beijing report saying that more than 40 percent of goods sold online in China are either fake or of poor quality. This new report looks similar to another one that came out early this year uncovering rampant piracy among Chinese e-commerce firms. This time no specific companies are named in the latest media reports. The report earlier this year named many specific companies, and cited Alibaba’s popular Taobao mall as one of the most egregious marketplaces for trade in counterfeit goods. Read Full Post…
Bottom line: Hailiang looks well placed for growth due to its small size, a major new expansion and positioning in the recession-proof education space, which could help to boost its shares that look quite cheap at current levels.
Hailiang builds business in primary education
After a period of neglect due to their low-tech image and overly eager expansion by some, Chinese education stocks appear to be coming back into vogue on growth that looks solid, if not spectacular. On the heels of solid quarterly reports by 2 sector leaders 2 weeks ago, the much smaller and recently listed Hailiang Education (Nasdaq: HLG) has just released its first post-IPO earnings report that shows similar respectable growth. But more intriguing is the potential for growth acceleration, as the company launches a massive new campus and starts to expand its well-regarded brand as one of China’s leading private educators.
As a regular China IPO watcher, I’ll admit that Hailiang didn’t make it onto my radar screen in July when it made a small offering using the relatively low-profile “best-efforts” method. That’s not too surprising, since China’s markets were in free-fall at that time after a spectacular run the previous year, and their downward spiral was infecting most of their US-listed Chinese cousins. Read Full Post…
Bottom line: Baidu’s new upscale online shopping mall looks more focused and well designed than its earlier e-commerce initiatives, but could have a difficult time finding an audience due to stiff competition.
Baidu tries e-commerce again with upscale mall
Online search leader Baidu(Nasdaq: BIDU) is hoping the third time is the charm for its drive into e-commerce, with the formal launch of its new online mall with a distinctly foreign flavor targeting high-end shoppers. I’ve followed Baidu for a long time now, and the company certainly has a poor track record in e-commerce and more broadly for homegrown initiatives like this latest one called Baidu Mall.
But that said, the company has found more success recently by buying assets outside its core online search area, and then giving them access to its own vast cash and other resources to help them quickly gain market share. Perhaps it’s hoping to use that strategy as well for the newly launched Baidu Mall, even though the platform itself seems to be Baidu’s own creation rather than an acquisition. Read Full Post…
Bottom line: A Shandong company’s purchase of nearly half of an Australian beef producer is the latest in a string of offshore meat acquisitions by Chinese firms, many of which could ultimately fail due to cultural differences.
Delisi buys 45 pct of Australian beef firm
Foreign meat companies have become the flavor of the day for acquisitive Chinese buyers, with word that a company called Delisi has just purchased 45 percent of Australian beef company Bindaree. The deal would come just weeks after leading Shanghai food group Bright Food paid a similar price for half of a New Zealand meat company, and a couple of years after the blockbuster purchase of leading US pork products maker Smithfield by WH Group (HKEx: 288).
Media are saying that a recent free trade agreement (FTA) between Australia and China may have helped to facilitate this latest deal between Delisi and Bindaree, and perhaps that’s partly true. But the reality is that China’s fast-growing economy is fueling a strong domestic appetite for meat. China’s own inefficient production also often means that locally produced meat is lower quality and more expensive than comparable products made overseas, which explains why these new offshore tie-ups are quite attractive. Read Full Post…
Bottom line: Their latest results show private education companies like New Oriental and TAL could be steadier, more recession-proof bets as China’s economic slowdown accelerates, though neither is likely to produce astronomical growth rates.
Educators New Oriental, TAL post steady growth
Leading private educators New Oriental (NYSE: EDU) and TAL (NYSE: XRS) have just reported their latest quarterly results, which seems like a good time to review an overlooked sector that could be relatively recession-proof as China enters a major economic slowdown. Both companies are sending similar signals, basically that their business is growing steadily and is set to keep on a similar track through the end of the year. That may normally not look too exciting, but in these economically uncertain times such words of reassurance actually seem relatively positive.
New Oriental shares surged after its latest report last week, even though the company didn’t announce any major changes in recent trends. TAL shares actually fell 2 percent after it issued a similar report that showed strong growth going into the end of the year. But that said, it’s also worth noting that TAL shares trade at a price-to-earnings (PE) ratio of 40, or double the level for the slower-growing New Oriental. A third, much smaller company from the sector, recently listed private school operator Hailiang (Nasdaq: HLG), will issue its first financial results announcement later this week. Read Full Post…
Bottom line: STO’s backdoor listing and Wumart’s pending de-listing reflect the rise in China of e-commerce, which is boosting delivery companies like STO and undermining traditional retailers like Wumart.
STO delivers back-door IPO
A couple of listing stories are shining a spotlight on China’s rapidly changing retail landscape, which is seeing consumers migrate en masse to e-commerce from traditional shops. The e-commerce boom has fueled a parallel explosion in demand for delivery services, and now one of the largest private couriers, STO, is getting set to make a backdoor listing. On the other side of the shopping aisle are struggling traditional retailers like Wumart (HKEx: 1025), which is reportedly getting ready to abandon its longtime Hong Kong listing through a privatization bid.
This pair of stories also reflects a few other emerging trends for publicly traded Chinese companies, including a growing preference for domestic listings compared with an earlier one for offshore IPOs in places like Hong Kong, New York and Singapore. Shenzhen in particular is fast emerging as a hot spot for high-growth companies to list, thanks to rapid growth in the 5-year-old Nasdaq-style ChiNext board. That trend is likely to continue with plans for a similar board in Shanghai, which could reportedly launch as soon as next year. Read Full Post…
Bottom line: A growing alliance between JD.com and Tencent could start to seriously challenge Alibaba’s dominance of China e-commerce in the next 2 years, as the rivals use the upcoming November 11 Singles Day to showcase their prowess.
JD joins Nov 11 courtship of online shoppers
This year’s November 11 Singles Day shopping extravaganza is shaping up as a guerrilla courtship of Chinese online shoppers by the nation’s 2 e-commerce leaders, as each vies for supremacy on a date that’s become the world’s busiest for online buying. Just days after leading operator Alibaba (NYSE: BABA) announced its own grand plans to seduce shoppers, rival JD.com (Nasdaq: JD) has come out with its own counter scheme that aims to court China’s hordes or singles in an alliance drawing on its growing ties with leading social networking (SNS) operator Tencent (HKEx: 700).
The stakes in this brewing war are huge. Last year alone, Alibaba reported 278 million orders worth $9.3 billion around the promotion that it created on the November 11 holiday, which represents the epitome of singledom due to its numerical representation as 11-11, or four 1’s. JD declined to give a sales value for its orders last year, but said it posted 14 million orders, which would translate to far more modest but still significant sum of about $500 million worth of merchandise sold based on Alibaba’s rate. Read Full Post…
Bottom line: A new Pepsi-branded smartphone set to launch in China next week could get an initial boost from strong publicity, but will quickly fizzle due to lack of special features to distinguish it from others in the crowded market.
Pepsi phone coming to China
An entertaining new twist to China’s overheated smartphone story is coming from the soft drink sector, with word that global beverage giant Pepsi (NYSE: PEP) is preparing to enter a crowded space that hardly needs any new entrants. The headline looked somewhat strange to me, though nothing surprises me these days in a market where names like industrial equipment supplier Sany (Shanghai: 600031) and air conditioner maker Gree (Shenzhen: 000651) have all jumped on the smartphone bandwagon.
Such a bandwagon approach is quite typical for China, where local companies are always quick to join the latest trends even if they have little or no experience in the business. But foreign names are usually a little more savvy, and this particular instance was the first I could recall of a major foreign brand joining this kind of silly herd mentality that often ends in failure and big losses for the associated company. Read Full Post…
