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INTERNET: Meitu Fires Up Online Services in Bid for Excitement

Bottom line: Meitu’s new disclosure of rapid growth in its internet services revenue looks encouraging, as it takes advantage of its early arrival status in a beauty products sector with big profit potential. 

Meitu makes over image with internet revenue growth

A month after its lackluster IPO, beauty app operator Meitu (HKEx: 1357) is trying to shore up its sagging stock by releasing some financial data that proves it’s more than just a place for people to doll up selfies to share with friends. The particular data shows that Meitu actually earned some relatively sizable Internet revenue from online sales and advertising in the month of December, proving it can make money more directly linked to its core beauty app.

Before that, the lion’s share of the company’s revenue had come from sales of smartphones optimized for its app. Critics had argued such a business model wasn’t really sustainable, since many such purchases are one-time items that might not be repeated. By comparison, online advertising and sales of products linked to its core app seem more sustainable. Read Full Post…

IPOs: Toncheng Goes Slow, ZTO Express Hits Doubters

Bottom line: Tongcheng’s lack of hurry to make an IPO reflects confidence about its cash position due to new backing from Wanda, while ZTO’s high profitability looks unusual amid huge losses reported by most of its rivals.

Tongcheng in no hurry to IPO

A couple of IPO stories are in the headlines as the new week begins, led by word that online travel site Tongcheng  is in no hurry to make a listing, following its link-up last week with the cash-rich Wanda Group. At the same time, delivery company ZTO Express, which is in a bigger hurry to list, is raising some doubts among observers who say the fat profits announced in its IPO prospectus are at huge contrast with peers in China’s highly competitive parcel delivery sector. Read Full Post…

BUYOUTS: Wanda’s Offer, eLong’s Exit, Yongle’s Backdoor

Bottom line: Dalian Wanda’s de-listing plan from Hong Kong is likely to succeed, while eLong could re-list in China and become the travel services provider for WeChat following its New York privatization.

Dalian Wanda joins homeward migration

A trio of new headlines are part of the recent homeward migration of offshore-listed Chinese companies, led by a highly anticipated $4.4 billion offer to privatize property giant Dalian Wanda (HKEx: 3699). Also making news is faded online travel agent eLong (Nasdaq: LONG), whose shareholders have just approved a privatization that will soon end its 12-year-old listing in New York. Finally there’s film production house Yongle Film and Television, which would have been a strong New York IPO candidate in a earlier era but is now in the process of making a backdoor listing in Shenzhen. Read Full Post…

CONSUMER: iKang Calls for Anti-Trust Regulation of Private Sector

Bottom line: China’s anti-trust regulators need to wake up to the growing clout of big nmes like Tencent and Ctrip in emerging industries and move more aggressively to stop them from engaging in anti-competitive behavior.

iKang accuses rival of monopoly behavior

A war of words broke out last week between two of China’s largest private clinic operators, as one accused the other of violating the nation’s anti-monopoly laws with a recent purchase. The case pitting iKang (Nasdaq: KANG) against larger rival Health 100 (Shenzhen: 002044) casts a spotlight on growing concerns about anti-competitive behavior in China’s vibrant private sector, which boasts many companies whose size is already approaching some of the nation’s largest state-run giants.

And yet despite the size of these companies and increasing cases of anti-competitive behavior, China’s anti-monopoly regulators have largely ignored the domestic private sector, focusing instead on big foreign and state-run firms. The validity of iKang’s accusations against Health 100 still need to be proven, since China’s private clinic sector is still very young and may not have the scale to qualify for monopoly consideration. Read Full Post…

TRAVEL: Qunar Eyes Airline, Ctrip Swallows Another Rival

Bottom line: Qunar’s new airline investment is unlikely to offset its shrinking access to tickets from major airlines, while Ctrip’s new purchase of a strategic stake in Uzai.com extends its strategy to eliminate competitors through such tie-ups.

Ctrip invests in Uzai.com

China’s rapidly consolidating travel services sector is taking an interesting new twist onto the runway, with word that number-two website Qunar (Nasdaq: QUNR) is joining a group launching a new airline. At the same time, separate media reports are saying that industry industry leader Ctrip (Nasdaq: CTRP) has just neutered another rival using its recent approach of buying a strategic stake in the company.

Both of  these stories point to the growing clout of Ctrip and Qunar, which were once bitter rivals but became a de facto single company last year after a landmark equity tie-up. I have long called for consolidation in China’s highly fragmented travel services sector, but now sense that Ctrip is looking increasingly like a monopoly after its recent buying spree that has seen it buy up strategic stakes in most of its major rivals. Read Full Post…

BUYOUTS: eLong, Ming Yang Near NY Exit Door

Bottom line: eLong and Ming Yang will complete their privatizations and de-list by the middle of the year, but more than half of the buyout offers for Chinese companies still waiting to exit New York will ultimately collapse.

eLong signs final buyout offer

Two longtime New York-listed Chinese companies are charging for the exit door on this last trading day in the Year of the Ram, with online travel site eLong (Nasdaq: LONG) and wind power equipment maker Ming Yang (NYSE: MY) both saying they’ve just signed final buyout agreements that will result in their privatization. Neither of these deals was ever in much doubt, since eLong’s was backed by Internet titan Tencent (HKEx: 700) and Ming Yang’s was relatively small, valued at less than $400 million, and was crafted by the company’s chief and dominant shareholder.

This pair are likely to ultimately complete their privatizations over the next 2-3 months and de-list by mid-year, following previous successful de-listings of names like online game operators Perfect World and China Mobile Games. But the big majority of previously announced buyout plans by around 40 US-listed Chinese companies are still pending, and I still believe that half or more of those could ultimately collapse due to failure to secure necessary funding. Read Full Post…

News Digest: February 5, 2016

The following press releases and media reports about Chinese companies were carried on February 5. To view a full article or story, click on the link next to the headline.
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  • Shanghai Disneyland (NYSE: DIS) Announces 30 Travel Partners, Heads Off Scalpers (Chinese article)
  • Merchants Bank (HKEx: 3968) Terminates Payment Support for P2P Lending Sites (English article)
  • Evergrande Taobao Soccer Club Fined 1 Mln Yuan, Sues League (Chinese article)
  • ChemChina, Syngenta (Zurich: SYNN) to Move Quickly on US National Security Review (English article)
  • eLong (Nasdaq: LONG) Enters into Definitive Merger Agreement for Going Private  (PRNewswire)

TRAVEL: Tuniu Hitches With HNA, Spurns Ctrip

Bottom line: Tuniu’s new tie-up with HNA looks like a smart move that could position it as a leading provider of resort vacation packages, and could also signal the rise of a meaningful rival to industry leader Ctrip.

Tuniu travels to Hainan with HNA

Leading online travel site Ctrip (Nasdaq: CTRP) has emerged as the loser in a recent bidding war for a stake in smaller rival Tuniu (Nasdaq: TOUR), which has just announced a new alliance that will see it receive a $500 million investment from one of China’s top traditional travel companies. This latest in a recent flurry of deals from the travel space will see HNA Tourism get about a quarter of Tuniu’s shares for its investment, making it Tuniu’s largest shareholder.

HNA Tourism is a unit of HNA Group, one of China’s more dynamic state-run investors that is also parent of Hainan Airlines (Shanghai: 600221), one of the country’s best-run airlines. Based in the tourism-friendly island of Hainan, HNA certainly looks like a logical and well-connected partner for Tuniu, even though media were reporting last week that the more entrepreneurial Ctrip was in talks for a similar deal. (previous post) Read Full Post…

TRAVEL: Hotel Owners Unite to Counter Ctrip, Qunar

Bottom line: A new alliance between some of China’s largest hotel operators is the latest reaction to Ctrip’s growing clout in the travel services sector, and could lead the anti-trust regulator to take remedial action next year.

Hotel operators band together against Ctrip

An increasingly powerful Ctrip (Nasdaq: CTRP) is in the headlines as the new week begins, with word that some of China’s top hotel operators are banding together to protest what they see as unreasonable demands by the online travel services giant. News of this action is once again spotlighting Ctrip’s recent purchase of big stakes in nearly all of its major rivals, in a bid to reduce the rampant competition that has plagued the industry over the last 2 years.

I wrote about this issue just last week, when media reported that Ctrip was in talks to take a stake in travel package site operator Tuniu (Nasdaq: TOUR), one of the few major players that doesn’t have an equity alliance with Ctrip. (previous post) I observed that such a tie-up would help Ctrip by neutering one of its last major domestic rivals. That could ultimately draw the attention of China’s anti-trust regulator, which until now hasn’t taken any action to break-up near monopolies in many  of the country’s Internet spaces. Read Full Post…

INTERNET: Tencent in Awkward Bid for Meituan-Dianping

Bottom line: Tencent’s latest plan to invest $1 billion in Meituan-Dianping looks like an awkward bid for control of the newly merged company, which could attract a rival bid from Alibaba.

Tencent as awkward suitor

Social networking giant Tencent (HKEx: 700) has never been very good at public relations, unlike slicker Internet rivals Alibaba (NYSE: BABA) and Baidu (Nasdaq: BIDU), whose founders are much better at wooing the media and investors. That refrain is ringing true once again with the latest mega-investment headlines, which appear to show Tencent making an awkward bid for the newly formed group buying giant created by the merger between former rivals Dianping and Meituan.

In fact, Tencent isn’t really bidding for the new company outright, but appears to be voicing its future intent by offering the merged company $1 billion in new funding. Such a funding would boost Tencent’s current equity in the merged company, in which it already holds a stake following its purchase of 20 percent of Dianping last year for $400 million. Such a bid would seem like a direct challenge to Alibaba, which also holds a relatively large stake in the newly merged company through its participation in a $300 million funding round for Meituan last year. Read Full Post…

INTERNET: BitAuto, Autohome Slump, Buyouts Coming?

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…