China has developed a sudden appetite for global microchip makers, with the latest reports saying several Chinese suitors are pursuing a purchase of the telecoms chip business of US-based MarvellTechnology (Nasdaq: MRVL). This kind of consolidation is sorely needed in the global microchip sector, especially in the telecoms area, where many smaller companies are having trouble competing with global titans Qualcomm (Nasdaq: QCOM) and Taiwan-based MediaTek (Taipei: 2454).
An interesting twist to this story has seen Chinese state-backed firms emerge as some of the main consolidators in this trend, reflecting Beijing’s desire to build up a local chip-making sector. Despite years of trying and billions of dollars in investment, China has yet to find success in building a homegrown chip giant that can challenge big global names like Qualcomm, Intel (Nasdaq: INTC) and Taiwan’s TSMC (Taipei: 2330). Read Full Post…
Bottom line: Aggressive spending on O2O initiatives by China’s traditional and online retailers is likely to produce a new boom-bust cycle, and companies should consider more M&A as part of their plans.
Retailers spend millions on O2O
Online-to-offline retail services, often called O2O, have become the flavor of the day for traditional and web-based Chinese retailers over the last year, with at least 3 major new announcements coming out on the topic late last week. Two involved big internal campaigns to boost O2O services at electronics retailer Gome (HKEx: 493) and traditional supermarket chain Renrenle (Shenzhen: 002336), while a third saw e-commerce giant JD.com (Nasdaq: JD) make a major investment in traditional retailer Yonghui Superstores (Shanghai: 601933).
Those efforts come just a week after leading search engine Baidu (Nasdaq: BIDU) reported disappointing quarterly earnings due to heavy spending on O2O, and more generally as O2O has become a buzzword for nearly all of China’s major traditional and online retailers. The activity surge reflects realization that leading retailers of the future will operate a hybrid model that uses both online and offline channels to sell products and services. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 11. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) to Invest $4.6 Bln in Retailer Suning (Shenzhen: 002024) (English article)
Bank of Communications (HKEx: 3328) Said to Let HSBC Name Vice Chmn (English article)
Bottom line: Both Autohome and especially BitAuto look like strong candidates for buyout bids, following rapid declines in both companies’ stocks due to a rapid slowdown in China’s car market.
Internet auto stocks run out of steam
We’ll begin the new week with a look at 2 of China’s leading online auto specialists, BitAuto (NYSE: BITA) and Autohome (NYSE: ATHM), whose shares have both tanked over the last 3 months in tandem with a rapid cooling of China’s car market. The trend is similar to what’s happened at online real estate service providers, whose shares have slumped for the last year due to a prolonged and much-needed correction in China’s overheated property market.
China stock watchers will know that E-House (NYSE: EJ), one of the two major US-listed real estate services firms, launched a privatization bid in June, part of a broader wave that has seen dozens of Chinese firms leave New York this year due to low valuations. (previous post) That leads to my next prediction, namely that BitAuto, Autohome or potentially both could soon become the latest companies to join the privatization queue. Read Full Post…
Bottom line: Jin Jiang’s pursuit of Shenzhen-based Vienna Hotel Group, combined with other recent M&A, could vault it to China’s leading hotel operator, though its sudden rapid expansion looks at least partly politically motivated.
Jin Jiang aims high with Vienna Hotel talks
Shanghai-based hotel operator Jin Jiang’s (HKEx: 2006; Shanghai: 600754) recent appetite for M&A continues to grow, with word that the company is in talks to buy a Shenzhen-based rival in a deal that would boost its hotel count by a third. A successful purchase of the privately held Vienna Hotel Group would mark the latest mega-purchase by Jin Jiang, which has suddenly emerged as China’s hot hotel company to watch.
Jin Jiang is certainly a household name in my adopted hometown of Shanghai, and this latest deal, when combined with others, would move the company into the ranks of one of China’s top 5 operators and the only one with a global presence. There’s only one problem with all of this, namely that Jin Jiang is one of the only top players that’s a state-run company. That contrasts sharply with other leading names like Homeinns (NYSE: HMIN), China Lodging (Nasdaq: HTHT) and Plateno, that are all privately owned. Read Full Post…
Bottom line: Alibaba’s naming of a westerner and former top Goldman Sachs executive as its new president looks like a smart move to boost its struggling global expansion, and could bring more focus to the division over the next year.
New Alibaba president to lead international efforts
After muddling around on the global stage for a while without much to show for its efforts, I’m happy to see that e-commerce giant Alibaba (NYSE: BABA) has finally taken the step of hiring someone with extensive experience outside China to spearhead its international expansion. The company’s naming of a former Goldman Sachs executive as its new president should help to bring some focus to an international drive that to date has been quite fragmented and hasn’t produced any solid results.
More broadly speaking, the naming of Michael Evans as the new president of Alibaba Group marks the second major appointment for the company in the last 3 months, as founder Jack Ma installs a new executive team to head his $200 billion company. His decision to name foreigners to some of the top spots mirrors a similar strategy by PC giant Lenovo (HKEx: 992) and also Tencent (HKEx: 700), one of Alibaba’s chief rivals. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 8-10. To view a full article or story, click on the link next to the headline.
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Jin Jiang (HKEx: 2006) in Talks To Buy China-based Vienna Hotels Group (Chinese article)
JD.com (Nasdaq: JD) to Buy 10 Pct of Yonghui Superstores for 4.3 Bln Yuan (Chinese article)
Gome’s (HKEx: 493) E-commerce Unit Appoints New Management in Drive to IPO (English article)
Anbang Insurance to Make Over $1 Bln Bid for Japan’s Simplex: Sources (English article)
Youku Tudou (NYSE: YOKU) Changes Name, to Spend 10 Bln Yuan on Content Development (Chinese article)
Bottom line: Chinese solar panel makers who can set up profitable offshore factories could be poised for good long-term growth, demonstrating they can survive without support from Beijing.
Jinko gets financing for Malaysia plant
Two new moves on the solar front show that leading Chinese panel makers continue to march offshore in a bid to avoid anti-dumping sanctions in the US and possibly in Europe. One move has ReneSola (NYSE: SOL), one of the most advanced in the offshore migration, announcing a new joint venture in the US. The other has JinkoSolar (NYSE: JKS) landing new financing for a panel manufacturing plant in Malaysia.
Both news items look relatively encouraging, showing the Chinese panel makers want to demonstrate they can manufacture profitably in these overseas locations without financial support from Beijing. But JinkoSolar’s announcement is also showing just how tough that transformation could be, since most of the funding for its new Malaysia plant is coming from a major Chinese policy lender. Read Full Post…
UPDATE: Since originally writing this post, Internet giant Tencent has launched its own buyout offer for eLong. Ctrip has commented that cooperation with Tencent would represent a win-win. (Chinese article)
Bottom line: Ctrip is likely to make a buyout offer for eLong by year-end, but its profits will remain under pressure for at least the next year as it battles with Qunar for market share.
Profits under pressure at the Ctrip lodge
Leading online travel agent Ctrip (Nasdaq: CTRP) has just released its latest quarterly results that show just how fierce competition has become in China’s travel market, as heavy spending eroded its profits despite big revenue growth. That competition was even more evident in the latest results for eLong (Nasdaq: LONG), which was once Ctrip’s main rival but more recently has developed an increasingly cozy relationship with its former foe.
I’ve been predicting for the last few months that Ctrip will ultimately make a buyout bid for eLong, following a steady series of recent moves that were bringing the companies closer together. The announcement of Ctrip’s and eLong’s latest quarterly results on the same day seems like more than coincidence, and is further evidence that a marriage could soon be coming. But before any formal marriage proposal, Ctrip would also be wise to take a long, hard look at eLong’s financials, which don’t look too impressive. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 6. To view a full article or story, click on the link next to the headline.
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Ctrip (Nasdaq: CTRP) Says Working with Tencent on eLong Buyout Is a Win-Win (Chinese article)
Fashion E-Commerce Site Moonbasa Launches US Brand Mall (Businesswire)
Bottom line: Ctrip is likely to make a counter-bid for eLong following a surprise offer from Tencent, sparking a potential bidding war that should ultimately see Ctrip emerge as the victor.
Tencent launches surprise bid for eLong
I’ve been predicting for the last few months that leading online travel site Ctrip (Nasdaq: CTRP) would make a buyout bid for former rival eLong (Nasdaq: LONG), so I was quite surprised to read that such a bid has come instead from Internet giant Tencent (HKEx: 700). This particular move is all the stranger because Tencent hasn’t shown much interest in the travel sector before now, though it previously invested in eLong and now owns about 15 percent of the company.
I also have to suspect that this particular bid came without the knowledge of Ctrip, which itself owns 37 percent of eLong. Ctrip got its stake after joining a group that bought out a controlling 62 percent of eLong previously held by US travel giant Expedia (Nasdaq: EXPE) earlier this year. Tencent has owned its stake in eLong since 2011. Ctrip’s recent moves have all pointed to its own buyout offer for eLong, leading me to believe that we could quickly see a bidding war break out for the company. Read Full Post…
