Retail/Consumer

INTERNET: Money Losers Meituan, Luckin Search for Profits

Bottom line: Meituan’s opening of its delivery unit to more customers looks smart but will require execution to succeed, while shares of money-losing Starbucks challenger Luckin will move steadily downward in the months after its super-sized IPO. 

Meituan opens up delivery service

A couple of money-losers are in the headlines these last few days, casting a spotlight on how profits continue to evade many of China’s hottest tech companies and what they’re doing to try to change that. This kind of loss-making isn’t all that uncommon for such startups. But in at least one of the cases we’re looking at today, the company Meituan Dianping (HKEx: 3690), is already a decade old or more, depending on which piece of it you look at. That hardly qualifies as a startup by most people’s definition, even though the company is still losing massive money.

The news involving Meituan has it opening up one of its biggest money gobblers, which specializes in restaurant takeout delivery, to other third-party customers besides just restaurants. The other news involves Luckin, an app-only coffee chain that wants to challenge Starbucks (Nasdaq: SBUX). That news had the company significantly supersizing its IPO plan to $500 million despite the fact that it’s just two years old.  Read Full Post…

IPOs: Money-Burners DouYu, Luckin Look to Wall Street for Cash

Bottom line: Live streaming gamer DouYu should get relatively strong demand for its $500 million New York IPO, while a smaller listing plan by younger coffee specialist Luckin is likely to die on the vine.

Coffee specialist Luckin brews up Wall Street IPO

One of the longest runs I can recall for New York IPOs by Chinese firms continues to chug ahead, with two new filings, one by live streaming game operator DouYu and the other by a high-tech Starbucks (Nasdaq: SBUX) challenger called Luckin. This particular IPO window is now rapidly creeping up on its second anniversary and doesn’t seem to show too many signs of running out of steam.

The big difference between companies coming to market now is that many are younger and still losing big money, compared with companies earlier in the wave that were older and mostly profitable. That’s not too surprising, since usually the most profitable companies move to the front of the line because they’re naturally more attractive. Read Full Post…

E-COMMERCE: Is Amazon Leaving China, or Not?

Bottom line: Amazon’s withdrawal from selling domestic goods to local buyers in China was inevitable due to its lack of a standout service and cut-throat competition from Alibaba and the money-losing JD.com.

Amazon shutters core China e-commerce selling domestic goods to domestic buyers

The e-commerce headlines have been buzzing these last few days with word that global giant Amazon (Nasdaq: AMZN) is abandoning China, representing the latest setback for a western Internet company in the large market. Amazon has come out with some statements clarifying the matter, in a move somewhat akin to what happened when Internet peer Google (Nasdaq: GOOG) made a similar withdrawal nearly a decade ago.

As Google did then and Amazon is doing now, both companies are being quick to point out that they aren’t completely withdrawing from China, but rather are just exiting what’s arguably their most important business. In Google’s case it shuttered its core China search engine. Now with Amazon, the company says it’s shuttering the part of its business that sells domestically-sourced Chinese products to customers in China. (English article) Read Full Post…

E-COMMERCE – Profit-Seeking JD.com in Overhaul Frenzy

Bottom line: A steady stream of layoff and cost-cutting reports around JD.com appear to show it’s trying to sharpen its operations to achieve sustained profits starting in the second half of this year. 

Reshuffle going on at JD.com

What’s up with e-commerce giant JD.com (Nasdaq: JD)? That seems to be the question of the moment, amid a recent series of nonstop reports of shakeup at China’s perennial No. 2 in the e-commerce world. The company was stuck under a cloud for much of the second half of last year as its founder, Richard Liu, stood accused of rape in the US. That cloud was finally lifted when the prosecutor looking into the matter decided not to file charges.  (English article)

Since then JD.com has been the subject of a nonstop stream of rumors and confirmed reports involving everything from layoffs to corporate overhauls to an imminent divorce between Liu and his wife. The latest reports seem to continue in that vein, including one saying the company plans to lay off about 8 percent of its workforce and another of some major moves in its top ranks. The latter comes after JD confirmed in February it was laying off 10 percent of its senior executives. (English article) Read Full Post…

INTERNET: Online Education Looks Good in Principle

Bottom line: The online education sector is currently in a teething phase that could last for the next two years, but could offer big potential for investors who can separate the wheat from the chaff. 

Big potential in online education?

Today I thought I’d look at some of the major online education stocks to hit the market over the last two years, most turning in a decidedly negative performance that may or may not be justified. The latest of those, Koolearn (HKEx: 1797) stumbled out of the gate late last week with a flat trading debut, and since has posted some minor gains that probably don’t mean too much. (English article)

Koolearn’s anemic performance actually looks quite strong when compared with some of the others that have floated shares over the last two years. Most of those are down moderately to sharply over the last 52 weeks, led by a 67 percent plunge for one called Puxin (NYSE: NEW) and a 55 percent slide for another called Sunlands (NYSE: STG). Read Full Post…

E-COMMERCE: Alibaba Eyes Germany, UK and Video Streaming

Bottom line: Alibaba’s interest in Metro’s China operations is part of its new retail strategy, while the purchase of a British payments company by its Ant Financial unit could give it a strong toehold in the European payments market.

Alibaba in new shopping spree

After a period of relative quiet, e-commerce giant Alibaba (NYSE: BABA) is suddenly springing into three relatively major headlines simultaneously on the investment front. Two have a European angle, one involving a major potential investment in German retailer Metro and the other in a British financial services provider by its Ant Financial affiliate. The other is a trans-Pacific deal of sorts, and has the company investing in Bilibili (Nasdaq: BILI), a leading U.S.-listed Chinese video streamer.

In all honesty, this particular flurry of deals seems a bit random and it’s almost certainly coincidence that all are in the headlines at the same time. But that said, each does reflect one or more tendencies by this hyperactive company, which I’ve previously said has far more cash than it knows what to do with.  Read Full Post…

E-COMMERCE: JD Dodges a Bullet, Gets Support from E-Commerce Has-Been

Bottom line: A US prosecutor’s decision not to file rape charges against JD.com’s founder may bring short-term relief to the stock, but the case still shows the importance of understanding the unusual role Chinese founders play at their companies.

Scales of justice tip in JD.com’s favor

On this day after Christmas I thought I’d play a little catch-up by weighing in on the controversial decision that saw a Minnesota prosecutor decline to press rape charges against JD.com’s (Nasdaq: JD) founder and CEO Richard Liu. Following the big announcement at the end of last week, there’s been a minor follow-up as another former China e-commerce executive came to Liu’s defense, only to get blasted himself and end up issuing an apology.

There are several big lessons in this tale, led by the fact that Chinese standards for what constitutes acceptable behavior are not always in sync with those in the West. That’s an important lesson for Western investors who may buy into these companies thinking that, for example, a JD.com is the same thing as Amazon.com (Nasdaq: AMZN). The JD case shows that clearly there are major differences in terms of behavior by both the companies and their founders. Read Full Post…

E-COMMERCE: China E-Commerce Answers Beijing’s Import Call

Bottom line: China’s drive to boost imports will benefit the nation’s big e-commerce companies with cross-border trade capabilities, though such purchasing will still be a small fraction of their overall volume.

China steps on import accelerator

It may be election day in the US, but here in China the focus is decidedly on imports with the staging this week of a massive import-focused expo in Shanghai. This particular event, officially called the China International Import Expo, has big political overtones, which I’ve looked at in a bit more depth in my weekly column on doing business in China, for anyone who is interested. (English article)

I’ll recap that element briefly in a moment, but the focus of this post will fall squarely on some relatively big numbers coming out of three of China’s leading e-commerce companies, in terms of the kinds of imports they think they can facilitate over the next few years. One report has added up commitments from Alibaba (NYSE: BABA), JD.com (Nasdaq: JD), Suning (Shenzhen: 002024) and NetEase (Nasdaq: NTES), and determined the four have collectively said they could facilitate 1.5 trillion yuan in imports, equal to about $216 billion. (Chinese article) Read Full Post…

E-COMMERCE: Alibaba Lays Out Big Goals in Annual Letters

Bottom line: Alibaba’s vague road map in its latest chairman and CEO annual shareholder letter is too far off to be meaningful, but does chart its aspirations to change from its current form to something more like an IT services company.

Alibaba shares future vision in shareholder letter

Alibaba (NYSE: BABA) founder Jack Ma and his heir apparent Daniel Zhang have just laid out their vision for the e-commerce giant in their latest annual letter to shareholders, and I have to say it’s at once very grand while also being quite short on detail. There are some lofty goals revealed inside, headlined by a new plan with some targets for what the company hopes to achieve by 2036. Never mind that that’s nearly 20 years away, which is like an eternity when it comes to the Internet.

At the same time, there’s a very general road map for how we get there, all of which I’ll detail shortly. Alibaba has actually executed relatively well so far on some of its road map, which roughly has it transforming from a mere e-commerce company to something more like an IT services provider. But nearly all of that diversification has been within its highly protected domestic market so far, and it’s far from clear it can replicate that model into its nascent international operations. Read Full Post…

IPOs: No One Comes to Haier’s German Party

Bottom line:  Haier’s weak IPO under a new German program to internationalize Chinese stocks owes to lack of awareness and thin trading, and reflects challenges the new market will face in its drive for recognition.

Haier IPO party draws low interest

What if you threw an IPO and nobody came? That’s what seems to be happening for home appliance giant Haier, which has just made the inaugural listing on a new Sino-German stock exchange aimed at internationalizing Chinese companies. The program captured headlines earlier this year when it was first announced that Haier had been selected to make the inaugural listing. But momentum has rapidly faded since then.

I’ll examine some of the reasons for the lackluster debut shortly, and what it might mean for the internationalization of Chinese stocks, which appears to be the bigger goal with this program. But first let’s review this latest less-than-dazzling end to a story that began with relatively strong sentiment and big hopes. Read Full Post…

E-COMMERCE: Dangdang Orphaned by Cash-Challenged HNA

Bottom line: The collapse of Dangdang’s $1.2 billion sale of itself to HNA shows the deal was most likely fueled by backdoor connections with no grounding in financial reality, and the company will probably be sold ultimately at a much lower price.

Dangdang comes out a lemon after HNA sale collapses

It’s Friday and I’m quite looking forward to the weekend, so I thought I’d indulge myself with a more gossipy post on the latest troubles of e-commerce has-been Dangdang. Anyone looking for good stock tips with this one will probably be somewhat disappointed, since Dangdang was one of a large group of Chinese firms to privatize from New York over the last few years in pursuit of higher valuations by re-listing at home.

A number of companies from that re-listing wave have already re-listed here in China, often with results that bore out the thesis that such a process was well worth the effort. Among those are names like Focus Media (Shenzhen: 002027) and Homeinns (Shanghai: 600258), which are now worth considerably more as China-traded companies than they ever were in New York. Another notable success is WuXi AppTec (Shanghai: 603259), a drug maker that was part of the larger WuXi PharmaTech that de-listed from New York in 2015. Read Full Post…