Bottom line: Meitu’s shares are likely to price and debut weakly due to skepticism about its profit potential from big western investors, but could perform better over the longer term if the beauty app can monetize its large user base.
Meitu sets IPO price range
What’s likely to be Hong Kong’s biggest high-tech IPO in nearly a decade is creeping ahead, with word that beauty app operator Meitu has set a price range for its widely watched offering that puts it within reach of its target to raise $750 million. But a read between the lines shows that this offering could easily price at the lower end of its range, following earlier investor worries that Meitu might have difficulty leveraging its huge customer base into meaningful profits anytime soon.
Meitu’s quandary is hardly unique, in an Internet universe where having huge user numbers doesn’t always translate to big profits. In this case Meitu, operator of an app that lets users tweak selfies to make themselves look more attractive, is quite rich in terms of traffic, with 450 million active users. But it hasn’t found a way to actually make money from that audience, and instead earns 95 percent of its revenue from sales of smartphones that draw people to its app. Read Full Post…
Bottom line: NetEase’s finish at the top of a global ranking for mobile game downloads attests to its rising status in the sector, while the pork business of its founder Ding Lei also appears to be gaining traction after years of effort.
NetEase mobile games top Tencent in October
Perennial runner-up NetEase (Nasdaq: NTES) has suddenly vaulted into the champion’s spot on China’s mobile game leader board, unexpectedly passing Tencent (HKEx:) in an important metric for their industry. The surprise move is probably a fluke, and I expect Tencent will retake the top spot in the next rankings for most sales from online mobile game app downloads compiled by App Annie. Still, it does underscore why I’ve previously said that NetEase is probably the most underappreciated company among China’s top Internet players. Read Full Post…
Bottom line: Meituan should be able to eventually monetize the vast audience for its selfie app, but may have to settle for a valuation below the $5 billion it wants for its IPO due to shorter-term investor skepticism.
Meituan banks on beauty for $750 mln IPO
Plans for a Hong Kong listing by selfie app Meitu are steaming ahead, but are also drawing some differing opinions from different sides of the East-West border. It seems Chinese fans of the app that lets users enhance photos of themselves to show their best face have quite a high opinion of this local beauty, believing it could be worth up to $5 billion. But westerners are a tad more skeptical, noting that Meitu now derives most of its money from smartphone sales rather than from anything directly related to the app. Read Full Post…
Bottom line: Xiaomi’s Singles Day sales show it’s still dependent on low-end models for its smartphone business, while Tencent shares could be set for a pause as it celebrates adulthood with its 18th birthday.
Tencent turns 18
After a couple weeks’ hiatus, I’m returning to the blogosphere with one item from last week’s Singles Day shopping extravaganza, and another from one of the few major Internet companies that was absent during that festival. In the Singles Day headlines is word from Xiaomi that it topped the list for most sales by a smartphone maker during the shopping fest. Meantime, media are noting that social networking giant Tencent (HKEx: 700) has just celebrated its 18th birthday by announcing it will give out 300 of its shares to each employee. Read Full Post…
Bottom line: A new $3.5 billion bank loan to help pay for game developer Supercell and an investment in shared bike service Mobike extend Tencent’s savvy strategy of targeted backing for companies that can quickly contribute to its core businesses.
Tencent nears mega loan for Supercell buy
Leading Internet company Tencent (HKEx: 700) is in a couple of major investment headlines as the new week begins, one in the virtual realm and the other grounded on the streets of major cities like Beijing and Shanghai. The larger of the items comes with word that Tencent is on the cusp of securing a $3.5 billion loan to help pay for its pending purchase of a controlling stake in Finnish game maker Supercell. The other item has the company leading a recent funding round for Mobike, operator of a shared bicycle service that is helping to revive China’s biking tradition. Read Full Post…
The following press releases and news reports about China companies were carried on October 15-17. To view a full article or story, click on the link next to the headline.
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ChemChina, Sinochem in Talks on Possible $100 Bln Merger: Sources (English article)
Tencent (HKEx: 700) to Sign $3.5 Bln Loan to Finance Supercell Purchase (Chinese article)
Weibo (Nasdaq: WB) Has Nearly Eclipsed Twitter (NYSE: TWTR) by Market Value (English article)
Smartisan Denies Rumors to be Aquired by NetEase (Nasdaq: NTES) (Chinese article)
Tongcheng Eyes IPO in 3 Years After Merger with Wanda Travel (Chinese article)
The following press releases and news reports about China companies were carried on October 14. To view a full article or story, click on the link next to the headline.
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WeWork raises $260 Mln in Funding From China’s Jin Jiang (HKEx: 2006) (English article)
Wanda Recruits Former Executives at Google (Nasdaq: GOOG) China, Guangfa Bank (English article)
Autohome (NYSE: ATHM) Announces Receipt of Withdrawal of Going Private Proposal (GlobeNewswire)
Google, Facebook Participate in Trans-Pacific Cable Linking HK, Los Angeles (Chinese article)
Shared Bike Service Mobike Completes C-Round Funding, Led by Tencent (HKEx: 700) (Chinese article)
Bottom line: Tongcheng’s merger with Wanda’s travel unit could create a strong new rival to counter Ctrip, and could become even stronger through a potential future tie-up or merger with HNA-backed Tuniu.
Tongcheng merges with Wanda Travel
For more than a year Internet giant Ctrip(Nasdaq: CTRP) has seemed almost invincible, buying up most of its major rivals one by one to consolidate its position as the nation’s leading travel agent. But the company may finally be coming up against a major rival in its bid to dominate the lucrative sector, with word that real estate and entertainment giant Wanda has bought up Tongcheng, one of Ctrip’s last remaining major rivals.
This particular tie-up is slightly unusual, as Ctrip previously invested around $200 million for a stake that was reportedly as high as 30 percent in Tongcheng, according to media reports a couple of years ago. (previous post) That would have valued Tongcheng at about $650 million, which is a fraction of the valuation of more than 20 billion yuan ($3 billion) that Tongcheng was worth, based on the latest investment by Wanda. Read Full Post…
Bottom line: Giant Interactive is banking on Playtika to jump-start its stalled growth, while NetEase’s extension of a major licensing deal will further consolidate its position as China’s second largest online game firm.
NetEase extends Blizzard agreement
A couple of gaming stories are making headlines as we head towards the long Chinese national day holiday, with NetEase (Nasdaq: NTES) and Giant Interactive both inking major deals that should help cement their place as 2 of China’s top players. The first deal has NetEase extending its long-running licensing deal with top global game designer Blizzard Entertainment (Nasdaq: ATVI) for some of its most popular titles, including the World of Warcraft series. The second has Giant buying Israeli social game maker Playtika, in a deal that was previously reported to be worth around $4.4 billion. Read Full Post…
Bottom line: The closure of online grocer Tablelife and a major overhaul at paid advice service Fenda show investors are growing more impatient with Chinese Internet companies without clear road maps to profitability.
Online grocer Tablelife shuts down
Two news items on downsizing websites reflect not only intense competition on China’s Internet, but also a growing impatience among financial backers for money-losing sites without a clear road map to profitability. It wasn’t long ago that anyone with a dot-com name could easily find hundreds of thousands or even millions of dollars in funding, as both domestic and foreign investors threw money at anything with even the slightest hint of growth potential.
Fast forward to the present, when investors are becoming far more selective and avoiding companies that can’t show a clear paths to profits due to stiff competition and notoriously stingy Chinese web surfers. That reality has apparently spelled the end of the line for online gourmet grocer Tablelife, and a major scale-back for paid advice service Fenda following a 47-day disappearance from the Internet. Read Full Post…
Bottom line: Yum China’s new stock will post moderate gains of 3-6 percent when trading begins on November 1, while Merchants Securities’ IPO shares will price in the middle of their range and debut flat to up slightly.
Merchants Securities makes HK listing
IPOs are heating up as we head into the fourth quarter of 2016 and companies race to complete offerings before the traditionally slow period between Christmas and Chinese New Year. The last week alone has seen progress on what could be the world’s 2 biggest offerings this year, being made by Postal Savings Bank of China and P2P lender Lufax. (previous post) Now 2 more mega listings are in the headlines, as brokerage Merchants Securities prepares for an IPO in Hong Kong and KFC parent Yum (NYSE: YUM) gets set to spin off and separately list its China unit in New York. Read Full Post…
