One year after the legalization of recreational use of cannabis in Canada, and following up on the previous discussion of those public companies gathering partners/supports, ramping up production and declines in ASP, here is an another snapshot as of 2019 Q3.
The number of kilograms sold is soaring.
But ASP keep falling.
And here is the graph for aggregated market cap of cannabis companies as of 11/15.
Paying to become a member of a video platform has gradually become mainstream in China, at least for the younger generations.
Consumer behaviors have been changing from searching for free sources (as there are fewer of them now than before) to paying for high quality and hassle-free subscriptions.
The leading platforms, iQiYi and Tencent Videos, have paying members exceeding 100 million in 2019 Q2 and 2019 Q3 respectively. The paying percentage is around 20% for a 500 million MAU (iQiYi 2018 Q4 MAU 454.5 million).
Alibaba’s Youku is only little behind (numbers are not disclosed).
Similar trends are found in Tencent Music and NetEase Music. While paying percentage is ~4-5%, it is picking up. Tencent Music’s online music paying users grew 42.2% yoy to 35.4 million (5.36% of 661 million MAU).
Emerging platforms like Bilibili are also seeing more paying users percentage.
As Direct-to-Consumer (DTC) businesses are booming and going public as companies, their earnings report gave us some insights into their gross margins and what those products cost the companies to produce (cost of goods sold is the flip side of gross margin).
Canada Goose, in their Second Quarter Fiscal 2019 results, said that DTC gross margin is 75.6%, a 40 bps increase from last year.
cost of goods sold: 24.4%
Moncler similarly has a gross margin of 76.6% for 2019 H1.
cost of goods sold: 23.4%
Tiffany in the most recent quarter has a gross margin of 62.7%, decreasing from 64% the year before. LVMH recent announced its attempt to acquire Tiffany.
cost of goods sold: 37.3%
Even the giant consumer staples company Procter & Gamble’s gross margin stays at 47.7%.
cost of goods sold: 52.3%
The current Meituan (MeituanDianping) came from a merger between Meituan and Dianping in December 2015.
Once a company invested by Alibaba, Meituan has become more closer with Tencent after the merger.
At the beginning of 2016, MeituanDianping raised $3.3 billion from Tencent, DST Global and Temasek at a $15 billion pre-money valuation; meanwhile, Alibaba sold its stake for ~$900 million in the same month.
Later that year, in April 2016, Alibaba invested the $900 million in Ele.me and Ant Financial invested $350 million.
The war has already changed from Yelp and Groupon to more comprehensive areas – restaurants and other local services.
[Note – in 2014, Priceline (now Booking.com) agreed to buy restaurant booking service OpenTable for about $2.6 billion in cash. But in China, dining is not exactly scheduled by time but by getting a number into the line, determined by how many people are ahead of you.]
However, US and China are similar in the world of food delivery. Meituan and Ele.me are fighting in China while Uber Eats, DoorDash, GrubHub, PostMates are fighting in the US. The difference – China uses e-bikes and US uses cars.
And for other services like movies, Meituan spun-off Maoyan in 2016. Maoyan is competing with Tao Piaopiao, which raised ¥1.7 billion in 2016.
In the US, the market is led by Fandango and Atom Tickets. But the market is not limited to movies – it’s about all kinds of shows, concerts and exhibitions.
Meituan is also offering hotel & travel bookings, fighting in the war with Ctrip.
Going back to Meituan, it raised $4 billion in October 2017 from Tencent, Sequoia, GIC and Tiger Global.
Meituan Dianping introduced its ride-hailing operation Meituan Dache in February 2018.
In April 2018, Alibaba acquired Ele.me for $9.5 billion.
Same week , Meituan acquired mobike for $2.7 billion.
Later that month, Ant Financials led a round of $700 million for Hellobike.
Meituan went for IPO in Hong Kong in September 2018, raising $4.2 billion.
Another OTA, Tongcheng-Elong, with Tencent and Ctrip as major shareholders, went IPO in Hong Kong in November 2018, raising $180 million.
Summing up the wars Meituan is in:
In the last post, we look at the city coverage by three carriers.
Here is another comparison of the plans they provide, in terms of price and data.
Before looking at the table, another data point is useful – in September 2019, an average user consumed 8.39GB in data, up ~60% from 5.14GB September 2018, which grew ~2.6x from ~2GB in September 2017.
China Mobile’s plan has two version Personal & Family (the latter includes fixed broadband services).
There is not much difference between carriers, except that –
| Data Plan (GB) | China Mobile | China Unicom | China Telecom | avg. costs per GB | Speed |
| 30 | 128 | 129 | 129 | 4.3 |
500 Mbps
|
| 40 | 159 | 169 | 4.1 | ||
| 60 | 198 | 199 | 199 | 3.3 | |
| 80 | 239 | 239 | 3.0 |
1 Gbps
|
|
| 100 | 298 | 299 | 299 | 3.0 | |
| 150 | 398 | 399 | 399 | 2.7 | |
| 300 | 598 | 599 | 599 | 2.0 |
On the last day of October, three carriers in China unveiled their 5G plans and supported cities to the public.
Each carriers covers 50 cities. And doing a simple coverage overlap check, we could find 44 cities having three operators, 4 cities having two and 10 cities having one.
In total, 57 cities are covered with 5G plan(s).
Here are 45 cities with coverage by three carriers:
3 cities covered by two carriers:
9 cities covered by one carrier:
The word BAT seems to be the past, as AT (Alibaba & Tencent) have evolved into bigger ecosystems and entered into the league of $400 billion market cap club.
Other internet companies, including Baidu, are in another league. Ranked by market cap:
Also, private companies such as ByteDance is also in this league.
In another post weeks before, I wrote how Uber Card can beat Chase Sapphire Reserve (CSR) in many ways.
But things change fast.
Two of my favorite perks are removed/reduced in this new Uber Credit Card – $50 annul credit in subscription is removed (a huge drop in NPV when comparing with other cards), and 4% dining is changed to 3% (a 25% reduction!)
Uber is definitely trying to save some costs and increase cardholder’s usage of Uber here. There will be no cash back – rewards are redeemed in the form of Uber Cash.
After the changes, Uber Credit Card will earn 5% on Uber related purchases (like Amazon Prime Rewards Visa Signature Card has 5% on amazon purchases). So when comparing costs of Lyft and Uber, technically you need to do a 5% adjustment to see which is better (too much of a hassle!).
The changes are coming for February 2020 billing period according to the email I received.
The new card design looks better tho.
Years ago, we have entered into a world where communication with one another is instant and nearly cost-free. For broadcasters, this is the golden age that they could spread their messages easier than ever.
But that time seems to the last, as tech firms supporting those platforms are taking or required to take more actions in limiting messages/ads allowed to broadcast.
The underlying thesis – people realized that the nature of information will change depending on the number of audience.
Twitter’s recent action is to ban political ad purchases – to reach a large audience just by spending money. We could easily see that in a world such thing is allowed, it would just become a competition for war-chest, candidates bidding higher prices to reach the audience.
Some actions are for general accounts/messages – a Facebook account or post for example. Most are justified actions now. But this is a slippery slope. More messages could have been banned for the sake of overall well-being.
On the other hand, tech firms don’t want to spend too much on screening messages/ads. After all, they are not speaking those languages. But the challenges they are facing are more real than ever, while implementing more rules will also draw more critics.
There is a balance and trade-off here.
Tech firms need to balance between the percentage of communications allowed and the overall “healthiness” of the platform. The latter would impact long-term ads sales, users growth/engagement and political pressure/costs.
The most lucrative segment of China’s high speed railway system filed it IPO application with CSRC.
It announced its preparation of IPO back in February.
The 1,318km railway began construction in April 2008 and started operation in June 2011.
| 2019 (Jan – Sep) | 2018 | 2017 | 2016 | |
|---|---|---|---|---|
| Passenger Revenue (‘0000 ¥) | 1,204,204.99 | 1,579,069.55 | 1,556,737.53 | 1,418,926.44 |
| PassengerMiles (billion km) | 25.86 | 34.46 | 34.24 | 31.83 |
| Unit Price (¥ per km) | 0.466 | 0.458 | 0.455 | 0.446 |
| Occupancy % | 79.91% | 81.64% | 80.18% | 73.38% |
Unit price is consistent with experiences, e.g. Nanjing South to Shanghai Hongqiao is ~295km and costs ¥134.5, which translates to ¥0.456 per km in unit price.
For occupancy rate, there is some seasonality fluctuation (Jan – Sep vs. Oct – Dec).
Total revenue breakdown:
Income Statement:
Profitability is insane.
| Total Revenue (‘0000) | 2,500,191.65 | 3,115,842.16 | 2,955,540.94 | 2,625,761.72 |
|---|---|---|---|---|
| COGS (‘0000) | 1,185,571.50 | 1,629,918.30 | 1,593,526.42 | 1,514,366.73 |
| Gross Margin | 53% | 48% | 46% | 42% |
| Net Income (‘0000) | 1,269,335.26 | 1,366,419.72 | 1,207,143.13 | 902,434.75 |
| NI Margin | 51% | 44% | 41% | 34% |