Bottom line: Anbang Insurance is paying a big premium for US luxury hotels and may have to sell them for losses when China’s property market corrects, while China Lodging looks like a good bet due to growing profits from its focus on hotel franchising and management.
China Lodging posts big profit growth
A couple of hotel stories are in the headlines as we head into the new week, led by a surprise blockbuster deal that will see Chinese insurer Anbang buy US-based Strategic Hotels & Resorts for $6.5 billion. Meantime, one of China’s largest private hotel operators, China Lodging (Nasdaq: HTHT), has just reported its latest quarterly results that showed a big jump in profitability, as it mimics western peers by focusing on franchising and management services rather than self-developing properties.
These 2 stories both involve hotels but are also quite different, since Anbang’s move is squarely focused on overseas markets and its purchase represents an investment in property ownership. By comparison, China Lodging, owner of the budget Hanting hotel chain, is a domestic story of a company trying to move away from property ownership and into the higher end businesses of hotel management and franchising services. Read Full Post…
Bottom line: Hertz’s sale of its Car Inc stake reflects the Chinese company’s new focus on hired car services, and could see Car Inc fall into the red as its UCar affiliate vies with Uber and Didi Kuaidi in the fiercely competitive market.
Hertz dumps Car Inc
A complex transaction involving Car Inc (HKEx: 699) is making the headlines as the new week begins, reflecting a transformation from its roots as a rental car specialist into a hired car services company competing with Uber and Didi Kuaidi. The deal will see former strategic stakeholder Hertz (NYSE: HTZ) sell most of its stake in the company to UCar, Car Inc’s hired car services affiliate. At the same time, Car Inc’s chairman and one of its largest shareholders will also sell his stake in the company to UCar, which will become one of Car Inc’s biggest shareholders.
There’s no explanation for the shuffle in the announcement, but it does seem to show that Car Inc’s Chairman Charles Lu wants to move his company more quickly into the hired car services sector, which is growing faster but is also fiercely competitive. That would explain Hertz’s decision to sell its stake, since Hertz is a global rental car company that probably has little interest in China’s ultra competitive hired car services market. Read Full Post…
A scalping story that saw a person scammed after buying an invalid ticket to Century Park brought a smile to my face, partly because the money involved was quite small and also because the tale itself was rather ridiculous. But my smile was quickly followed by some eye rolling and exasperation, as the story once again showed just how pervasive scalping is in here in Shanghai and throughout China.
Reasons for buying tickets and other items from scalpers vary widely, but this particular case also highlighted another phenomenon that perplexes me and many others here in China. That phenomenon is the “back door” mentality, which sees many Chinese, especially from the older generation, always looking for short-cuts to do even the most common things like buying a park ticket. Read Full Post…
The following press releases and news reports about China companies were carried on March 12-14. To view a full article or story, click on the link next to the headline.
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Huawei Enterprise Unit Achieves Profitability in 2015 (Chinese article)
Canadian Solar (Nasdaq: CSIQ) Reports Q4 and Full Year Results (PRNewswire)
Alibaba’s (NYSE: BABA) Cainiao Logistics Arm Targets Colleges (English article)
Huayi (Shenzhen: 300027), Tencent (HKEx: 700) Prepare Vehicle for Hollywood, Korea Deals (English article)
Ant Financial’s Sesame Credit Starts Beta Testing of Enterprise Credit Service (English article)
Bottom line: A new Beijing bailout allowing banks to swap bad loans for shares of defaulting borrowers will only prolong China’s ballooning bad loan crisis, saddling lenders with shares of poorly run companies.
Beijing prepares new bank bailout plan
Exactly how many times can Beijing rescue the country’s ailing banks? The answer to that question appears to be “at least one more time”, and most likely quite a few more in the next few years. That’s my latest assessment on reading new reports that Beijing is finalizing yet another plan to relieve the burden of ballooning bad debt weighing on most of the nation’s banks.
I’ll discuss the latest rescue plan shortly, and also add why this particular plan is one of the least attractive I’ve seen so far. But before that, I should use this occasion to say once more how this move shows why Chinese banks aren’t a very good investment. Put simply, most of China’s banks still behave more like policy lenders than real commercial banks, making loans based on directives from Beijing and local government officials. Read Full Post…
Bottom line: Xunlei’s performance and stock price could come under pressure over the next year due to stiff competition in China’s consolidating online video market and lack of support from struggling strategic partner Xiaomi.
Xunlei swings to quarterly loss
As rumors swirl of a potential merger between the online video services of Tencent (HKEx: 700) and Sohu (Nasdaq: SOHU), smaller rival Xunlei (Nasdaq: XNET) has just announced its latest quarterly results that show why it may be difficult for the company to remain independent in the rapidly consolidating sector. Xunlei swung to a loss in the quarter and saw its revenue contract — hardly encouraging signs for a company that’s already quite a small player in China’s fiercely competitive online video market.
The big “elephant in the room” in this instance is struggling former smartphone sensation Xiaomi, which purchased 30 percent of Xunlei around the time of its 2014 IPO for a reported price of about $200 million. Xiaomi went on to form a content distribution service with Xunlei last summer, leading me to predict that it could make an offer to buy the company outright. (previous post) Read Full Post…
Bottom line: Sohu is likely to combine its online video service with Tencent’s in an ongoing consolidation of the Chinese sector, and the tie-up could presage a Tencent-backed privatization bid for Sohu later this year.
Sohu, Tencent in video merger?
More consolidation could be coming in China’s online video sector, with word that web portal Sohu(Nasdaq: SOHU) may soon sell a major stake in its video service to social networking giant Tencent (HKEx: 700). The move would follow a similar tie-up between this pair in the online search space, and might lead some to wonder if Tencent may even be preparing an eventual bid for Sohu itself. I’ll end the suspense on that matter by saying such a sale seems unlikely, for reasons I’ll explain later. But the pair could still ultimately do more deals together
This particular tie-up would mean that China’s online video sector is firmly consolidating around the country’s 3 biggest Internet companies and a handful of others. Leading search engine Baidu (Nasdaq: BIDU) is closely associated with Qiyi.com, a leading player, while Alibaba (NYSE: BABA) last year purchased Youku Tudou, another leader. The other major player is LeEco (Shenzhen: 300104), formerly known as LeTV, and state-owned broadcasters in Shanghai and Hunan are also making big pushes into the space. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 11. To view a full article or story, click on the link next to the headline.
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China to Ease Commercial Banks’ Bad Debt Burden Via Equity Swaps (English article)
Bottom line: Huawei’s move into electronic payments is its first foray outside its traditional strength as a hardware developer, and reflects its growing aspiration to challenge global rivals Apple and Samsung.
Huawei tries services with Huawei Pay
Fast-rising smartphone maker Huawei no longer seems content to target homegrown rivals like Xiaomi as its main competitors, and is increasingly looking to challenge global leaders Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). That’s my interpretation of the latest headlines, which say Huawei is preparing to roll out a new mobile payments service in China, less than a month after similar moves by the 2 global leaders.
This particular move comes as a bit of a surprise, since there were no previous indications that Huawei was planning such a foray. Up until now, Huawei was largely been a company focused on hardware, unlike Apple, which has built a big stable of service-related offerings like Apple Pay and its music and video services around its core smartphones and computer products. Read Full Post…
Bottom line: A new rival bid for Dangdang and the long closing period for Jiayuan’s privatization reflect growing shareholder resistance to low prices being offered for Chinese companies trying to de-list from New York.
Dangdang gets rival buyout bid
A couple of new headlines reflect the growing chorus of complaints about low bid prices being made for Chinese companies privatizing from New York, led by a surprise new rival offer for former e-commerce leader Dangdang (NYSE: DANG). In the other headline, online dating site Jiayuan (Nasdaq: DATE) is finally moving closer to the New York exit door, after a year-long process that saw the company’s original buyout offer meet with stiff resistance from shareholders unhappy about the price.
The volume of protest noise against some of the most recent offers has certainly been growing, as company shareholders try to get more money for their stock in the wave of buyout offers. The most recent twist saw shareholders cry foul over a management-led buyout bid for online cosmetics seller Jumei (NYSE: JMEI) last month. (previous post) A slightly different but related development saw the founder of medical clinic operator iKang (Nasdaq: KANG) cry foul after his own bid for his company got trumped by a higher offer from an independent bidder. (previous post) Read Full Post…
Bottom line: Spring Airlines is richly valued at current levels, but could be a strong bet over the next decade as it builds an Asia-wide budget carrier run out of Shanghai.
Spring Air growth set to accelerate
I’m not usually a fan of airline stocks, though one notable exception is budget carriers that tend to be more nimble and cost conscious, and are often run by entrepreneurs rather faceless corporate types. As China’s oldest budget carrier, Spring Airlines (Shanghai: 601021) certainly fits that profile, which is why it’s one of my favorites among Chinese stocks listed both domestically and abroad.
Since making its long-delayed IPO in Shanghai last year, Spring’s stock has soared, more than doubling in price since it first started trading in January 2015. That’s quite remarkable when one considers that the benchmark Shanghai index is down 15 percent over the same period, as China’s stock markets undergo a major correction that dates back to last June. Read Full Post…
