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.
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.
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).
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
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)
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.
The first official meeting of the Libra Council is scheduled for October 14th in Geneva.
Dots to connect: future governance of cryptocurrency, possibility of a global cryptocurrency network run by companies, China can move into global crypto payments if supported/approved
Travis announced that he would be starting a new fund with his windfall from Uber shares sold in its most recent major secondary round. At the time, Kalanick said the new fund — called 10100, or “ten one hundred” — would be geared toward “large-scale job creation,” with investments in real estate, ecommerce, and “emerging innovation in India and China.” CSS has two businesses, CloudKitchens and CloudRetail (controlled with one entity I assume), which focus on redevelopment of distressed assets in those two areas. [Crunchbase]
And in Feb 2019, Travis Kalanick said to plot China comeback with ‘shared kitchen’ business – CloudKitchens in China, partnering with Zhang Yanqi, former COO of ofo.
OYO
also backed by SoftBank, started from assembling hotel rooms under its brand and management system in India.
acquired by Blackstone, the traditional and one of the largest real estate players in the work, back in June 2017 for approximately £500m.
Source: The Office Group
But with a different type of investor, TOG might be on the path of growing profits.
Its financial results for 2015 reported its EBITDA up 33% to £15.4m (2014: £11.6m), and revenues up 62% to £54.3m (2014: £33.6m). TOG is London’s largest privately-owned occupier of office space (at least by that time). [leadersleague]
Dots to connect: valuation of startups, business model of burning money, Softbank’s strategy, similar companies in shared economy, corporate governance, etc.
