MIT’s new college of computing was formed on Sep 11 2019, enabled by Schwarzman’s $350 million donation.
And Schwarzman’s new book is out – What It Takes: Lessons in the Pursuit of Excellence
Tag: Finance
「News of the Week」Japan’s New Internet Giant
WSJ – Yahoo Japan and Chat App Line Agree to Merge
As part of the deal, SoftBank Group subsidiary SoftBank Corp. and Naver said they would buy all the shares in Line not already owned by Naver at ¥5,200 ($47.78) a share. Naver owns 72.6% of Line as of Monday. SoftBank Corp. and Naver will pay ¥170 billion ($1.56 billion) each to buy those Line shares, SoftBank said.
Line Pay has 37 million users and PayPay, operated jointly by SoftBank and Yahoo Japan, has 19 million. (Nikkei)
Dots to connect: competitions in ads, e-commerce, payment in Japan, monetization on 82 million Line MAU, Japan moving to cash-less, SoftBank’s consolidated financial performance, new superapp, etc.
「What’s News In China」
Shanghai Green Valley Pharmaceuticals (Green Valley, 绿谷制药) today announced on Nov 2 that China’s National Medical Products Administration (NMPA) has approved Oligomannate (GV-971) as new drug for the treatment of “mild to moderate Alzheimer’s disease (AD) and improving cognitive function.” It is the first novel drug approved for Alzheimer’s disease globally since 2003. The company is also planning a global phase 3 trial with sites in the U.S., Europe and other parts of Asia in early 2020 to support regulatory filings around the world. // prnewswire | fiercepharma
On Nov 5, Nio (NASDAQ: NIO), long being seen as the Tesla in China, announced its partnership with Intel’s Mobileye to build self-driving EVs. Under the planned collaboration, Mobileye will provide NIO with the design of the self-driving system building on the Mobileye AV Series, a L4 AV kit comprised of the Mobileye EyeQ® system-on-chip, hardware, driving policy, safety software and mapping solution. NIO will take on the automotive-grade engineering, integration and mass-production of Mobileye’s system for both consumer automotive markets and for Mobileye’s mobility-as-a-service (MaaS) applications. In addition to integrating the self-driving system into its vehicle lines, NIO will develop a specially configured variant of electric AVs that Mobileye will use as robotaxis, deployed for ride-hailing services in global markets. // TechCrunch| intel
36Kr (NASDAQ: KRKR), a Beijing-based news and data provider, known for tracking fundraising and tech related news in China, raised $20 million in its Friday debut on NASDAQ. The company is similar to TechCrunch or Crunchbase (its affiliated Crunchbase News). // Crunchbase News
Meituan: Fighting Every War
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:
- Food delivery: with Alibaba’s Ele.me; same-day delivery: Dada-JD Daojia
- Movie tickets: with Alibaba’s Tao Piaopiao
- Ride-hailing: with Didi
- Bike-sharing: with Hellobike and Didi Bike (Qingju)
- Hotel and travel booking: with Ctrip
- Payment & wallet
- …
SoftBank Group Earnings Presentation: WeWork Impacts, 60% Discount, Best Deal In Alibaba
SoftBank Group’s presentation gives a fairly good illustration of what the group is holding, the loss on book due to WeWork and the turnaround plan for it.
The presentation talks a lot about WeWork, but it’s Alibaba that contributes/matters the most right now. Nearly half of ($123 billion out of the $256 billion) its equity values of holding comes from Alibaba.
And given SoftBank Group’s market cap ~$80 billion now, it is a very good source of Alibaba exposure even without hedge (personally I think other holdings are also okay).
The turnaround plan relies a lot on higher occupancy rates and cost cuttings as WeWork manage the properties longer.
Here is the presentation.
New Rankings For Chinese Internet Companies (Nov 1, 2019)
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.
- Alibaba market cap $459.43 billion
- CYQ2 – Revenue was RMB114,924 million, an increase of 42% year-over-year (just reported CYQ3 revenue RMB119,017 million)
- Tencent market cap $396.57 billion
- CYQ2 – Total revenues were RMB88,821 million, an increase of 21% year-over-year.
Other internet companies, including Baidu, are in another league. Ranked by market cap:
- Meituan market cap HK$543.24 billion, ~$69 billion
- CYQ2 – Total revenues increased by 50.6% year-over-year to RMB22.7 billion (Total Gross Transaction Volume (GTV) on our platform grew by 28.7% to RMB 159.2 billion)
- Pinduoduo market cap $48.23 billion
- CYQ2 – Total revenues in the quarter were RMB7,290.0 million, an increase of 169%
- JD.com market cap $45.78 billion
- Net revenues for the second quarter of 2019 were RMB150.3 billion, an increase of 22.9% from the second quarter of 2018 (JD uses traditional retail model that takes inventory, so revenue includes value of goods sold)
- Baidu market cap $36.47 billion
- CYQ2 – Total revenues reached RMB 26.3 billion, increasing 1% year over year, or 6% year over year, excluding the impact of announced divestures
Also, private companies such as ByteDance is also in this league.
Beijing-Shanghai High Speed Railway Co.,Ltd. IPO Filing
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% |
「What’s News In China」
NetEase (NASDAQ: NTES)’s e-learning unit, Youdao (有道) reduced its fundraising target to $116 million from $300 million IPO on October 15. Founded in 2006, Youdao provides online dictionaries, online classrooms and language courses, with 100 million monthly average users in China in the first half of 2019. The company set a price range of $15 to $18 for its American Depositary Shares (ADSs) and will be listed under the symbol “DAO”. // reuters | SEC
TikTok (by Bytedance) launched an education program in India on October 17, as the popular short-video app looks to expand its offering and assuage local authority in one of its biggest markets. TikTok has been working with Indian partners in the edtech sector ahead of the campaign launch. TikTok claims to have 200 million users in India, of which 120 million are active every month. // TechCrunch | FT
6th World Internet Conference (or “Wuzhen Summit”) opened in China’s Zhejiang Province (10/20-22). Executives from major tech companies from home and abroad such as Microsoft, Qualcomm, Alibaba Group and Huawei attended the conference. // xinhua | scmp
「News of the Week」China Q3 GDP Growth Rate: 6.0%
国家统计局 National Bureau of Statistics of China – 2019年三季度国内生产总值（GDP）初步核算结果
The percentage growth decrease is high anticipated. The expected value was at 6.1%.
Dots to connect:
- IMF’s other forecasts
- cut China’s growth forecast to 6.1% from 6.2% for 2019, and 5.8% for 2020
- cut India’s growth forecast to 6.1% from 7% for 2019, and 7% in 2020
- Forecasts for the U.S. were cut by 0.2 percentage point to 2.4% annual growth in 2019; euro-area forecasts were cut 0.1 point to 1.2%
- Global
- July version: Global growth remains subdued. Global growth is forecast at 3.2 percent in 2019, picking up to 3.5 percent in 2020
- October version: Global growth is expected to slow to 3 percent this year, picking up to 3.4 percent in 2020 (a 0.2 percentage point downward revision compared with April)
- China’s monetary policies and debt levels.
- China’s central bank injects ¥200 billion market liquidity via MLF at 3.3%
- China’s new LPR and interest rate policy
- the PBoC cut the one-year LPR on August 20, from 4.31% to 4.25%; five-year LPR rate unchanged at 4.85%.
- cut one-year LRP again on September 20, from 4.25% to 4.2%
China’s Long-term Apartment Rentals Startups
After WeWork’s unsuccessful IPO, several long-term apartment rentals startups in China are preparing to list on Nasdaq. Q&K (青客公寓) will likely be the first, planning to raise $100 million, according to the SEC filing.
Firms like Q&K will lease apartments from individual landlords, renovate the space with uniform styles, and then sublease fully-furnished rooms to tenants, who are mainly young urbanites looking for affordable housing. Q&K reported a net revenue of USD 129.6 million in the fiscal year 2018, up 70.3% year-on-year. Net losses however doubled to USD 72.8 million in the same period. [kr-asia]
I do believe they are similar to WeWork in many aspects.
Q&K is more like a test for investors’ current appetite (especially needed after WeWork), with two other bigger players waiting in line. Not surprisingly, those are backed by Alibaba and Tencent respectively.
Ant Financial-backed Danke (蛋壳公寓) and Tencent-backed Ziroom (自如) both are also looking for an IPO to raise $500 million – $1 billion.
Danke raised $500 million in February 2019.
Ziroom raised $500 million in June 2019.