Retail/Consumer

E-COMMERCE: Alibaba’s New Retail Goes on Steroids with Grocery Plan

Bottom line: Alibaba’s plan to roll out 2,000 of its high-tech Hema grocery stores looks overly aggressive but typical for the company, and could prove costly if the concept fails to catch on.

Alibaba has big plans for Hema

E-commerce giant Alibaba (NYSE: BABA) is pretty much a carbon copy of its founder Jack Ma when it comes to standing still, in that the concept is completely foreign to both. I’ve been critical of the company in the past for getting into too many things too quickly without a coherent big-picture plan, and that’s what seems to be happening once more with Alibaba’s sudden obsession with finding a formula for the “new retail”.

Alibaba seems quite certain that retailing of the future will consist of some form of high-tech features, alongside traditional retailing concepts such as stores where actual products are sold and people can sit down for a fresh-cooked meal. Alibaba has been wheeling out a number of concepts on this new high-tech retail puzzle over the past year, but the latest plan is the first I’ve seen for an actual widespread roll-out of an actual chain. Read Full Post…

BUYOUTS: eHi Prepares to Drive Off, Jumei Bid Unravels

Bottom line: A third-party buyout offer for eHi could presage a wave of similar new bids for undervalued, profitable Chinese companies, while withdrawal of Jumei’s buyout bid could be followed by a new, lower offer.

eHi gets buyout offer

After a period of relative quiet, the privatization wave that swept US-listed Chinese companies nearly two years ago is bubbling back into the headlines with a couple of stories from different directions. In the “leaving” direction there’s car rental comp eHi Car Services (NYSE: EHIC), which has received a third-party offer to privatize for a slight premium to its latest stock price. In the other direction there’s cosmetics e-commerce firm Jumei International (NYSE: JMEI), which is finally withdrawing its management-led buyout offer nearly two years after first receiving the bid.

There’s no broader theme to these two deals, except perhaps that investors have become quite skeptical about such offers. The Jumei deal’s collapse shows why such skepticism is sometimes merited, though it’s also worth pointing out that about two-thirds of US-listed companies that announced plans to privatize during the wave in early 2015 actually completed those plans. Lackluster response to the eHi deal also shows a certain skepticism, probably because shareholders are still worried that many of these buyout bids are low-balling companies’ real values. Read Full Post…

RETAIL: Alibaba Boosts Grocery Rush with Sun Art Investment

Bottom line: Alibaba’s new investment in grocery operator Sun Art looks like a shrewd move into an area where logical synergies between online and offline shopping can be achieved.

Alibaba buys into Sun Art

After a period of relative quiet, e-commerce giant Alibaba (NYSE: BABA) is splashing back into the major M&A headlines with its purchase of a major stake in grocery retailer Sun Art (HK: 6808) for HK$22.4 billion ($2.9 billion). This particular deal looks strikingly similar to an earlier tie-up between Alibaba’s archrival JD.com (Nasdaq: JD), which is joining online and offline grocery carts through its own older tie-up with Walmart (NYSE: WMT).

Each of these plays looks relatively savvy, acknowledging that off-line shopping will continue to play a major role in the retail experience for certain products. Alibaba has embraced this online-offline approach with a vengeance over the past year, snapping up a series of existing retail chains and also rolling out its own concept convenience store that is completely automated. Read Full Post…

SMARTPHONES: Apple Finds Its China Mojo as Xioami Moves Up

Bottom line: Apple should be able to extend its return to growth in China into at least one more quarter, while Xiaomi should also be able to continue posting strong double-digit growth for the next year.

Apple returns to China growth

Apple (Nasdaq: AAPL) has just released its latest quarterly results that show China is back on a growth track, quieting skeptics who had said its latest iPhone was debuting to mostly snoozes in the world’s largest smartphone market. On a broader basis, IDC has also just announced its global figures for third-quarter smartphone sales, showing Huawei continues to creep up on Apple and could well take the global No. 2 spot from its U.S. rival over the next year if current trends continue.

Last but not least is China’s own Xiaomi, which is catching people’s attention again with the strongest growth of any global players in the third quarter, consolidating its position as the world’s fifth largest player. It’s probably too early to say that Xiaomi’s comeback story has legs. But the company is the only one posting triple-digit growth among the top 5 in the latest quarterly results, a distinction previously reserved for Huawei and Chinese rival  Oppo. Read Full Post…

IPOs: Floodgates Open With Tencent, Sohu, Bona, Fintech Listings

Bottom line: A periodic window of IPOs that opens every 2-3 years is taking shape, with fintechs and other new categories like online literature likely to do well, while older concepts  like e-commerce could struggle for attention.

My long-predicted IPO floodgate has finally burst, with no less than four major offerings in the headlines as we go into the new week. The new offerings I’m referring to involve two in the US, one for fintech startup Ppdai and another that has been talked about forever for Sogou, the search engine backed by Internet superstar Tencent (HKEx: 700) and the less steller Sohu (Nasdaq: SOHU).

Meantime, one of the other IPOs also involves Tencent, with its China Reading online literature unit getting cleared by the Hong Kong stock exchange and set to file its prospectus. Last but not least is Bona Film, the formerly New York-listed company that has been cleared for a re-listing in China.  Read Full Post…

IPOs: Biotech Listing Pops, E-Commerce Flops, Fintech to Come

Bottom line: A flurry of IPOs for offshore Chinese tech firms marks the start of an upcycle following a three year lull, with fintechs likely to be the top stars.

Secoo fizzles in trading debut

After a relatively boring first eight months of the year, the IPO market has suddenly come to life with a flurry of offerings that are turning in a mixed performance. E-commerce seems to be a bit passe, though you would never guess that based on the recent run-up in the stock of sector lead Alibaba’s (NYSE: BABA) stock. Meantime, a small-ish biotech offering has wowed investors, and the best looks set to come with a couple of fintech offerings this week and towards the middle of October.

This particular spurt looks at least partly tied to the Chinese National Day holiday that will see the entire country basically close for all of next week, prompting companies that have been waiting to list to speed up the process to finish beforehand. Last week we saw logistics specialist Best Inc (NYSE: BSTI) deliver an offering to tepid response, followed by a much better result for money-losing biotech start up Zai Lab (Nasdaq: ZLAB). The week ended with a fizzle for luxury e-commerce firm Secoo on the Nasdaq. This week before the holiday, we could see debuts for the year’s first $1 billion-plus offerings from fintech firm ZhongAn Insurance. That should be followed by another fintech mega-deal by Qudian in mid-October . Read Full Post…

IPOs: Fintech Hot, Logistics Not in New Listings for Qudian, Best

Bottom line: ZhongAn’s and Qudian’s IPOs are likely to price and debut strongly over the next few weeks on excitement about China fintech, while Best’s will debut to indifference following the slashing of its size.

ZhongAn, Qudian IPOs look hot

Three companies likely to list in New York and Hong Kong by the end of this month are setting the tone for what’s set to be a busy fall for similar new offshore offerings from Chinese companies. Two of those are coming from the hot fintech sector, where online microlender Qudian and online insurance seller ZhongAn appear to be drawing strong interest in IPOs that could each raise north of $1 billion. But logistics company Best Inc is moving firmly in the other direction, with the announcement that it has just slashed the size of its fund-raising plan by nearly half.

Neither of these themes is completely surprising, since fintech has become a hugely lucrative area in China due to the relatively greenfield nature of the sector. Until only very recently, nearly all financial services in China were dominated by state-run companies, which aren’t exactly known for their innovation and embrace of technology. That’s also partly true for logistics, though in that case the industry has quickly become a bit of a bloodbath plagued with cutthroat competition among around 10 major players. Read Full Post…

BUYOUTS: Investor Blasts Unfinished Buyouts at Jumei, iKang

Bottom line: Jumei could formally abandon its stalled buyout plan soon, putting more downward pressure on its stock, while iKang needs to enter serious negotiations with two bidders for the company.

Jumei, iKang under pressure over stalled buyouts

Ever wonder what happened to a handful of buyout plans for US-listed Chinese companies that were announced more than two years ago but never got completed? That’s certainly not a question that keeps most of us up at nights, but it’s suddenly popping into the headlines with a series of scathing letters from a minority investor called Heng Ren, which is criticizing two of the unfinished deals.

Specifically, Heng Ren is blasting online cosmetics seller Jumei International (NYSE: JMEI) and clinic operator iKang (Nasdaq: KANG), which both announced plans to privatize quite a while ago but have yet to complete those. These aren’t the only two whose privatization plans, which were part of a wave in the first half of 2015, failed to get completed. But most of the others that failed to complete their buyouts, including YY (Nasdaq: YY) and Momo (Nasdaq: MOMO), made specific announcements that they were abandoning their plans. Read Full Post…

CHIPS: Samsung Chases China Goodwill With Massive Chip Expansion

Bottom line: Samsung’s new $7 billion investment in a chip expansion in Xi’an should help to earn big government goodwill, which could help position its smartphone division for a rebound in China.

Samsung expands chip chip plant

A major new China investment by chip maker Samsung (Seoul: 005930) is spotlighting just how important the market has become to the company, and South Korean companies in general, and how they are trying to play into Beijing’s agendas to maintain their place at the table. That’s become all the more important lately, as a disagreement between Beijing and Seoul has been costing South Korean companies business in China, as often happens when such political disputes spill out into the business sector.

This particular investment, totaling $7 billion, was obviously in the planning stages long before that dispute broke out earlier this year, involving Seoul’s decision to install a sophisticated anti-missile defense system supplied by the US to counter the North Korean threat. But Samsung’s decision to make its announcement now looks shrewd, as it should win it some goodwill from Beijing at a time when the company’s smartphones face similar struggles in China that they’re seeing in the rest of the world. Read Full Post…

IPOs: Alibaba-Backed Logistics Firm Stumbles Towards IPO Gate

Bottom line: Best Inc is likely to make its New York IPO in the next two weeks, but its shares will price in the middle of their range and debut weakly due to stiff competition in the logistics sector.

Best Inc. raises IPO target

It’s been a quiet year so far for major Chinese IPOs in New York, but all that looks set to change soon with several major offerings coming down the pipeline. One of those is in the headlines as we head into the end of August, with word that Best Inc, also known as Best Logistics, is driving towards a New York offering that will raise up to $1 billion. That deal was first announced in June, so it’s a bit unclear why it has taken so long to jump back into the headlines with this boosted fund-raising target.

Based on what I’m hearing from one of my sources, the US securities regulator is giving extra scrutiny to a group of fintech companies that are all lining up to list in New York before the end of the year, due to the newness of the business type. Best Inc doesn’t really fall into that group, as it’s in a traditional business that’s thriving due to China’s e-commerce boom. What’s more, this company is also backed by e-commerce giant Alibaba (NYSE: BABA), and counts the former head of Google (Nasdaq: GOOG) China as its chief. Read Full Post…

E-COMMERCE: JD.com Shops for Expansion in Thailand

Bottom line:  JD.com’s Thai joint venture looks like a smart move into Southeast Asia, though it shouldn’t move too aggressively abroad and instead focus on becoming profitable.

JD.com tests out Thailand

China’s big Internet companies have a pretty varied record for expanding abroad. At one extreme there’s Alibaba (NYSE: BABA), which is using its big cash pot to buy a wide range of assets concentrated mostly in East and South Asia. Tencent (HKEx: 700) is in the middle, mostly buying strategic stakes in game-related companies, while Baidu (Nasdaq: BIDU) appears to have mostly abandoned the market after a few half-hearted attempts at global M&A and trying to open search sites in other countries.

And then there’s Johnny-come-lately JD.com (Nasdaq: JD), which admittedly has a far shorter history and is also the only one of the four leading Internet companies that’s still losing money. But that doesn’t mean that JD doesn’t have cash, and now it appears the company is looking to make its biggest splash abroad to date with the formation of a joint venture in Thailand. Read Full Post…