Category: Uncategorized

「What’s News in China」

China’s EV maker NIO (NYSE: NIO) 蔚来汽车 signed framework agreements with Hefei’s city government on a fundraising of more than 10 billion yuan ($1.42 billion) and new manufacturing facilities. NIO plans to establish NIO China headquarters, further expand its operations and deepen its relationship with local ecosystem partners in Hefei. NIO’s stock surged more than 30% on Tuesday morning. // NIO | Reuters

Naixue’s Tea, one of the biggest bubble tea chains in China, has filed IPO in the US to raise as much as $400 million. Naixue has over 230 stores in China. The fast growing coffee chain Luckin Coffee (NASDAQ: LK) with over 4,500 locations is valued at around $10bn. Naixue was valued at over ¥6bn in its March 2018 financing round. // Bloomberg | STCN

PepsiCo Inc (NASDAQ: PEP) has agreed to buy Chinese snack brand Be & Cheery (百草味) for $705 million from local jujube maker Haoxiangni (SHE: 002582). Be& Cheery sells snacks from nuts to dried fruits mainly on Chinese e-commerce platforms. // Reuters | Pepsico

Hillhouse Capital 高瓴资本 just launched its independent venture capital fund of ¥10bn. The new fund, called GL Ventures, will invest in both U.S. dollars and yuan in chunks ranging from 3 million yuan to $30 million. GL Ventures will focus on four areas: biomedicine and medical devices, software services and initiatives in tech innovations, consumer internet and technology, and emerging consumer brands and services. // 36Kr | Caixin

On Feb 24, ByteDance’s Feishu (飞书) announces free access to all organizations. Feishu is a Slack-like remote collaboration platform developed by ByteDance, with features including video conferencing, online shared doc, group chats, calendar & other team management tools, etc. // Feishu | cntechpost

What We Can Learn From GrubHub’s Earnings

As a pure-play food delivery public company, GrubHub has a lot to provide for investors interested in this field.

When it went IPO in April 2014, GrubHub had an average of 135,000 orders daily in 2013.

In 2019Q4, that number has grown to 502,600 (almost 4x). But the year-over-year growth rate has dropped to single digit.

One slowly growing number is the gross dollar value per order, which was $30.74 in 2017Q1 and $33.56 in 2019Q4.

The per order value could implies that group buying (>1; friends gathering, small corporates/teams, etc.) is probably a major purchasing behavior on GrubHub. It’s also a natural choice when people can “split” the overhead (all sorts of fees).

The average order value increases by ~10% in two years and could continue to grow if more business users order food deliveries.

Of the GMV, GrubHub only takes commission, delivery and others as fees (revenues). That “take-rate” has increased from 17.4% in 2017Q1 to 22% in 2019Q4.

The increase could be due to the increased marketing spending by restaurants. See a brochure for Grubhub pricing. But eventually, the take-rate will be reflected in foods’ prices and split with consumers.

That increase is good for the company but consumers may feel that food delivery has become more expansive while what they are buying is not better.

Cross major marketplace platforms, due to the delivery part of business, those food delivery companies might take a bigger % of the GMV as revenues.

The most concerning part of the costs is called “Operations and Support”, which grew from 38%  in 2017Q1 to 56% in 2019Q4.

A large part of that increase is due to the shift from independent contractors to GrubHub employees – on which regulators and other gig economy companies spent a lot of efforts.

Food delivery is still a very competitive space and market share needs to be won city by city. Compared with ride-hailing, which two big players remain in the US, we might see a few more players competing without major consolidation in the near term.

「What’s News In China」

On Feb 14, Oaktree Capital Management, a Los Angeles-based distressed debt manager, became the first foreign company to set up a wholly owned unit in China under a trade accord with the U.S. The Beijing-based subsidiary has a registered capital of $4.55 million. // Caixin

On Feb 17, OYO reported a $951 million revenue globally for the financial year ending March 31, 2019, growing 350% yoy. In 16 month, OYO China has grown into an annual revenue of $307 million (~1/3 of total revenue). While facing more pressure, OYO China now has expanded into 3 brands and signed up 19,000 hotels. // TechCrunch | FT

Coronavirus has pushed many industries in China to go digital. In the past few weeks, there are booms in enterprise remote working apps 远程办公 (DingTalk surpasses WeChat to rank first in the App Store in China on Feb 5), online house tours 云看房 (of the top 100 residential real estate developers, 92 have launched the online selling services), online grocery shopping 生鲜电商 (Miss Fresh GMV grew by 321% yoy during the Chinese New Year), etc.

Tesla (NASDAQ: TSLA) is in advanced stages of talks to use batteries from Contemporary Amperex 宁德时代 (SHE: 300750) that contain no cobalt – one of the most expensive metals in electric vehicle (EV) batteries – in cars made at its Gigafactory 3 in China. Tesla started to deliver cars from that factory in December 2019. // reuters

「News of the Week」Zuckerberg Ready For Facebook To Pay More Tax In Europe

Reuters – Zuckerberg ready for Facebook to pay more tax as welcomes rules review

Venturebeat – Zuckerberg ‘accepts’ that Facebook may have to pay more tax in Europe

Reuters – Treat us like something between a telco and a newspaper, says Facebook’s Zuckerberg

Dots to connect: global tax reform for tech companies, tech companies go beyond countries/regions, potential indirect trade war in digital world, tech ultimately benefits as it can balance between nations, the leading companies may make it hard for others to expand globally and follow suit, social medias as media & telecom companies, UK’s digital taxes, etc.

「News of the Week」Tesla, $968.99/share

Financial Times – Tesla shares surge again despite Saudi Arabian exit

  • Tesla made the company the world’s second-largest carmaker by market value.
  • The stock rose as much as 24.2 per cent to $968.99 about 12 minutes out from the closing bell, closing at $887.06.
  • The stock has more than doubled since the start of the year.
  • The stock notched their most actively traded day on Feb 4, with ~61 million volume.
  • Tesla reported a $105 million profit for 19Q4 the week before
  • Short squeeze – On top of the record dollar loss of $5.8bn in January, short-sellers lost a further $3.2bn as the extraordinary share price rally accelerated on the first day’s trading of the new month.
  • Tesla’s recent delivery from its Shanghai factory to the China market added to the enthusiasm. It is the first fully foreign-owned car plant in the country.

「News of the Week」Coronavirus

WSJ – What to Know About the New Coronavirus

Dots to connect: Gilead’s drug Remdesivir for Ebola, Abbvie’s Kaletra (Lopinavir/Ritonavir), Roche’s Tamiflu, Oseltamivir generic versions, JNJ’s Prezista, restaurant/coffee chains Yum China, Luckin Coffee, Starbuck, airline industry, drop in demand for oil and oil prices, other travel related industries such as Trip.com and Huazhu, second-order effects on internet-based services & healthcare services investments, etc.