Bottom line: Yingli appears to be in financial distress but will avoid defaulting on debt obligations coming due next week, while China’s broader solar panel sector is likely to face new anti-dumping tariffs in Europe later this year.
Yingli assures investors on bond payment
The solar panel sector has become quite a turbulent place these days, riding high one day on reports of major new plant construction, only to stumble the next on signs of conflict and financial distress. This kind of conflicting news reflects the fact that the industry is still in the midst of a major overhaul that could ultimately see a few more companies get closed down or purchased, leaving a smaller field of the biggest, best-run players to survive over the longer term.
The latest signs of distress are coming from Yingli Green Energy (NYSE: YGE), one of China’s largest players, which has just announced it has the necessary funds to pay off a bond that will mature next week. Some may see such an announcement as a sign of strength; but the fact that Yingli is taking the unusual step of making an announcement seems aimed at allaying market concerns that it might not make the payment. The other big distress sign is coming from reports that indicate Europe could soon re-launch an anti-dumping probe into Chinese solar panels, following complaints that the Chinese are violating an earlier agreement designed to avoid punitive import tariffs. Read Full Post…
Bottom line: Baidu could be entering a period of profit erosion that will put pressure on its stock, while Tencent’s latest investment hints it could be preparing to roll out a global gaming platform by the end of this year.
Baidu profit drops
China’s Internet “Big 3” of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700) are often in the news on any given week, but we’re seeing a rare instance where all 3 are in the headlines on this final work day before the May 1 break. Baidu is leading off the BAT headlines with the release of its latest quarterly earnings that are led by a rare profit decline due to soaring expenses.
Rising costs may have also been a factor in the Alibaba news, which has the company freezing its global headcount for the rest of the year as it tries to rationalize itself after a period a breakneck growth. Last but not least is Tencent, whose relatively large purchase of a stake in a US gaming firm hints at the direction it will take in its overseas expansion. Read Full Post…
Bottom line: TVB’s choice of a Shanghai-based traditional broadcaster as its mainland partner looks like a bad selection to ensure its future, as such traditional media rapidly get overtaken by more nimble Internet-based players.
TVB places bets on Shanghai Gang
Hong Kong has been buzzing this past week over the latest mainland encroachment on its media sector, which is seeing leading broadcaster TVB (HKEx: 511) sell a stake in itself to a Chinese investor. But few have gone past the headlines to see what’s really behind this deal, and whether it can help to ensure the longer term survival of a company that has long dominated Hong Kong’s broadcasting scene. In a nutshell, TVB is placing its bets on a group of Chinese media high-flyers that I like to call the “Shanghai Gang”, because they are rooted in China’s largest media market and have strong ties to the city’s monopoly broadcaster, Shanghai Media Group (SMG). Read Full Post…
Bottom line: Ant Financial’s bid for a stake in Indian smartphone maker Micromax reflects Alibaba’s recent focus on India, as it seeks to expand to markets where it can quickly grow and justify its high valuation.
Alibaba unit eyes Micromax investment
E-commerce giant Alibaba (NYSE: BABA) appears to have its sights set on India, with word that the company’s financial arm is leading a group that could invest $1 billion or more for a stake in local smartphone giant Micromax. The reported bid is being led by Ant Financial, which is separately run from Alibaba and has no equity relationship with the US-listed e-commerce giant. But such a bid would clearly be part of Alibaba’s broader global expansion, as it tries to justify its lofty valuation following a record IPO last September. Read Full Post…
Bottom line: Sina stands a 50-50 chance of getting a takeover bid within the next year, as suitors eye it for its low valuation, well-respected name and controlling stake of Weibo.
Sina anticipating suitor?
Leading web portal Sina (Nasdaq: SINA) has become one of China’s perennial Internet underperformers, leading to occasional talk that it might become a takeover target for a larger, better-run peer. Now Sina has just announced its renewal of a “poison pill” plan designed to prevent such a hostile takeover. This particular move looks like a formality rather than indicator of a looming takeover bid, since Sina launched the original plan 10 years ago and perhaps it is now is now set to expire. But the fact that Sina is not only renewing the plan, but doing so in a very public way, indicates it may feel it could become a takeover target in the current hot climate for Chinese Internet M&A. Read Full Post…
Bottom line: The new Nokia-Alcatel merger, combined with a continued low-key lobbying campaign by Huawei could ultimately convince Washington to ease its ban on Chinese telecoms equipment within the next year.
US to rethink Huawei ban?
A couple of new reports are casting a spotlight on the troubled relationship between Washington and leading Chinese telecoms equipment maker Huawei, and raising the intriguing potential for a much-needed compromise that might end the impasse between the pair. The impasse is really quite one-sided, with Washington banning the sale of all Chinese telecoms equipment in the US due to concerns about the potential for spying. But this kind of policy seems a bit broad, especially amid an accelerating sector consolidation that is leaving wireless carriers with fewer and fewer networking equipment suppliers to choose from. Read Full Post…
Bottom line: Tencent, Baidu and other Chinese Internet giants should rein in their appetite for new debt in anticipation of an economic slowdown that could sharply dampen their growth.
Tencent doubles bond program to $10 bln
Social networking (SNS) giant Tencent (HKEx: 700) shattered Chinese Internet records late last week when it said it would double the size of its already-large bond program to a massive $10 billion, becoming one of the biggest such programs ever for a private Chinese company. The move is part of a broader trend that has seen Chinese Internet firms raise billions of dollars over the last 2 years through a combination of bond offerings and IPOs, tapping strong investor appetite for their high-growth story.
Such sums would have been unthinkable just 2 or 3 years ago, even though China’s economy was growing much faster then and so were the profits and revenues at companies like Tencent. Floating so much debt is normally not a problem in such boom times, and is often used by strong companies like Tencent to fund their growth. Read Full Post…
The following press releases and media reports about Chinese companies were carried on April 28. To view a full article or story, click on the link next to the headline.
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iPhone Sales, China Boosts Apple (Nasdaq: AAPL); Shares Up Modestly (English article)
Lenovo (HKEx: 992) Eyes 100 Mln Cellphone Sales In New Fiscal Year – CEO (Chinese article)
Huawei CEO Says Chinese Cybersecurity Rules Could Backfire (English article)
Trina (NYSE: TSL) Signs Agreement In Hefei Zone for 300 MW DG Solar Power Plant (PRNewswire)
Bottom line: Apple’s new court victory in a China patent dispute shows its relations with Beijing are improving, positioning it well for growth in a country that is likely to pass the US as its largest global market in the next 1-2 years.
Apple wins China victory in patent dispute
A couple of new reports are showing that global gadget giant Apple (Nasdaq: AAPL) may have finally reversed its slumping fortunes in China, led by word that China probably overtook the US to become the world’s largest market for its iPhones in the first quarter of this year. The other report has Apple winning an important court victory against a Chinese company that accused it of illegally using its voice recognition technology.
This pair of upbeat stories come just a week after Apple scored another positive round of publicity in China, announcing it would make a relatively modest investment in 2 solar farms in southwest Sichuan province. (previous post) This sudden flurry of positive stories, and the fact that they’re being widely covered by China’s state-controlled media, shows Apple could finally be turning a corner in the country after a stormy relationship with Beijing over the last 2 years. Read Full Post…
Bottom line: China is likely to become Apple’s largest smartphone market by next year, while Huawei’s smartphones could make significant gains in the next 2 years en route to becoming one of the world’s top 2 brands.
iPhone posts China milestone
Three of the world’s top cellphone makers are in China-related headlines today, led by word that Chinese iPhone sales officially passed the US for the first time in Apple’s (Nasdaq: AAPL) latest reporting quarter. At the same time, 2 of China’s own homegrown cellphone makers with big aspirations are also in the headlines, with both Huawei and Lenovo (HKEx: 992) discussing their goals for the next few years.
One of those has Huawei’s smartphone chief saying he’s aiming to become the world’s largest brand within the next 3-5 years. The other has Lenovo’s chief executive saying he’s aiming to sell 100 million cellphones in the company’s latest fiscal year, as it consolidates its position after a period of rapid expansion. Read Full Post…
Bottom line: Coke’s proposed $400 million purchase of a Chinese protein drinks maker is likely to get quick regulatory approval, and could make significant contributions to its China operations within the next 2 years.
Coke makes new China M&A bid
Six years after a high-profile failure for a major China acquisition, global beverage giant Coca Cola (NYSE: KO) is trying once again with a smaller plan to buy a Chinese maker of protein drinks. This latest play for the maker of China Green-brand drinks looks like a smarter move by Coke, since the deal is valued at a relatively modest $400 million. By comparison, Coke’s failed attempt to buy leading Chinese juice maker Huiyuan (HKEx: 1886) was valued at $2.3 billion, which drew strong scrutiny from China’s anti-monopoly regulator that ultimately vetoed the deal in 2009. Read Full Post…
