Bottom line: Lack of revenue figures in a wealth of new data on WeChat indicates the service continues to lose big money, and could become a drag on Tencent’s profits if commercialization efforts don’t accelerate soon.
WeChat: Where’s the revenue?
Social networking giant Tencent(HKEx: 700) has just released a wealth of information about its wildly popular WeChat, including a headline figure that the wildly popular mobile messaging service now has a whopping 570 million active users. But missing from the wealth of new information are any meaningful monetary figures, reflecting the slow progress that Tencent is making in commercializing a service whose huge popularity also means its quite costly to operate.
People love to talk about WeChat and how popular it is, but you see far less discussion about how much money Tencent is losing on the service. There’s even less discussion of when it might become profitable. But all that said, Tencent is such a cash-rich company it can easily afford to keep pouring money into WeChat for the next decade or more until the day when profits finally come. The big risks, of course, are that investors may not be that patient, and that newer and more popular services could come along. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 29. To view a full article or story, click on the link next to the headline.
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Mobile Restaurant Queuing App ‘Delicious No Wait‘ Wins $100 Mln Series C (English article)
Bottom line: A Chinese buyer could have a strong chance of winning the bidding for US hotel operator Starwood, with CIC most likely to emerge as Beijing’s preferred candidate among a trio of interested local buyers.
Chinese buyers eye Starwood Hotels
Just a day after China’s 2 leading travel sites put aside their bitter rivalry and formed a major new alliance, we’re getting word of yet another major deal in the hot tourism sector. This time media are saying 3 Chinese buyers are eyeing Starwood (NYSE: HOT), one of the world’s top hotel operators. The 3 potential bidders include 2 of China’s leading private equity investors, China Investment Corp (CIC) and HNA Group. The third is one of China’s top hotel operators, Jin Jiang (HKEx: 2006; Shanghai: 600574), which has been on a buying spree recently both at home and abroad.
If one of the 3 succeeds, the deal would mark the largest purchase ever of an offshore asset by a Chinese buyer, based on Starwood’s latest market value of $15 billion. Word of the deal comes just a day after leading domestic online travel agents Ctrip (Nasdaq: CTRP) and Qunar (Nasdaq: QUNR) buried the hatchet in their bloody battle for share in China’s fast-growing travel market. A Starwood deal would also come less than a week after US-British cruise operator Carnival (NYSE: CCL) formed a new joint venture with 2 Chinese partners. (Chinese article) Read Full Post…
Bottom line: Solar shares are likely to remain volatile over the next year, with current trends continuing that see Chinese companies open more offshore plants and stronger players steal share from weaker rivals.
Mixed signals from solar sector
After a brief rally to kick off the week on upbeat guidance from sector leader Canadian Solar (Nasdaq: CSIQ), Chinese solar stocks have quickly given back most of their gains on a more ominous signal from money-losing ReneSola (NYSE: SOL), which says its CFO has resigned after just over a year on the job.
Timing of the departure of Daniel Lee is somewhat coincidental, as it comes just a week after I met him and he detailed his strategy for keeping output stable and paying down debt. That strategy helped ReneSola to shrink its net loss to $2.3 million in the second quarter from a much larger $18 million in the first quarter. But that loss-cutting didn’t come without a price, as ReneSola’s solar module shipments also dropped by a third over that period. 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…
The following press releases and media reports about Chinese companies were carried on October 28. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Announces September Quarter 2015 Results (Businesswire)
3 Chinese Suitors Show Interest in Starwood Hotels (NYSE: HOT): Source (English article)
Apple (Nasdaq: AAPL) Beats Wall Street, Investors Wary of China Sales
Bottom line: The equity tie-up between Ctrip and Qunar is likely to be an uneasy one driven by necessity rather than desire to work together, and stands a 50-50 chance of ending in divorce.
Ctrip, Qunar get hitched … sort of
The year 2015 will go down in Chinese Internet history as the year of the uneasy partnership, as several pairs of former foes suddenly merged even as their outspoken heads refused to work together. The latest of those unions is seeing former bitter rivals Ctrip (Nasdaq: CTRP) and Qunar(Nasdaq: CTRP) get together in a quasi marriage that qualifies as the largest and also strangest union to date.
This particular union isn’t even really a true marriage, and instead is a very big equity swap that will see Qunar’s controlling stakeholder Baidu(Nasdaq: BIDU) get 25 percent of Ctrip. Ctrip will get a larger chunk of Qunar on a percentage basis, ending up with 45 percent voting interest in its former rival. (Baidu announcement; English article; Chinese article) Like the other odd marriages this year, this latest one looks set for troubles, and could stand a very real chance of divorce. Read Full Post…
Bottom line: Tesla’s newly announced modest China sales and announcement of a plan for potential local production reflect the uphill road it faces in the Chinese market, which is unlikely to get much easier in the next 2 years.
Tesla still searching for China sales charge
China is fast becoming the land of promising upstart companies that failed to reach their potential, with word that former new energy superstar Tesla (Nasdaq: TSLA) has posted very ho-hum car sales in a market where it once held out big hopes. The rare China sales figures come as Tesla discussed possible plans to localize some of its manufacturing in the world’s largest auto market, a move that charismatic founder Elon Musk says could cut the cost of cars by up to a third.
The latest Tesla news came from a local media event in China that didn’t go off too smoothly, and apparently wasn’t meant to be reported by foreign media. The event’s lower-key nature and other glitches were unusual for Tesla, which was traditionally a master at slickly orchestrated events and appearances by Musk that gave the company hugely positive publicity when it first drove into China last year. Read Full Post…
Bottom line: New signals that China’s 3 telcos are reducing their spending could presage a rumored consolidation of the trio into 2, with China Telecom and Unicom the most likely to be merged.
China telcos rope in spending
The latest sign of a potential shake-up in China’s stodgy telecoms sector came late last week, when global networking equipment giant Ericsson (Nasdaq: ERIC) attributed reorganization and weak spending by the nation’s big 3 carriers as a major factor behind its disappointing quarterly results. Despite expectation that China’s big 3 carriers would spend heavily on 4G this year, actual amounts so far have been relatively modest from the trio of China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA).
The unexpected spending slowdown could be the latest sign that Beijing is planning an industry overhaul, following reports that first emerged last month of a possible consolidation of the 3 current mobile carriers into just 2. Such a move would reflect Beijing’s disappointment at the failure of China’s state-run carriers to become global innovators over the last decade, even after receiving monopoly rights over a market that has become the world’s largest for mobile and broadband services. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 27. To view a full article or story, click on the link next to the headline.
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Bottom line: The failure of 2 major touch-screen technology manufacturers in Guangdong is the latest sign of trouble in China’s overheated smartphone sector, with similar new closures likely to accelerate in the next few months.
Two more smartphone component suppliers go bust
China’s smartphone wars are taking an unexpected twist, with suppliers to some of the nation’s top brands emerging as the first victims of a prolonged battle for market share. I had previously expected at least one or two small- to mid-sized brands would bow out of the market by the end of this year, though we have yet to see any such developments.
Instead the inevitable shake-out appears to be starting in the supply chain, with media reporting that 2 major smartphone part suppliers have gone bankrupt in southern Guangdong province where much of the manufacturing takes place. (Chinese article) The insolvency of these 2 major suppliers, one in the boomtown of Shenzhen and another in the nearby city of Huizhou, comes just a couple of weeks after the bankruptcy of a major supplier of metal casings for smartphones sold by Huawei and ZTE (HKEx: 763; Shenzhen: 000063). Read Full Post…
