Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

Chinese super app <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> reported Q320 results earlier this week. Total revenue increased by 29% YoY in the period, but core Operating Profit declined by around 23% YoY, mainly due to growing losses in Meituan's New Initiatives segment. Meanwhile, Meituan's largest operating segment, Food Delivery, reported a 33% YoY jump in revenue, driven in part by a 61% increase in advertising and other revenue. However, margins on actual food delivery activity fell sharply compared to both Q319 and Q220. The reasons for the sharp dip in food delivery margins in Q320 are still unclear to us, but this crucial source of profits deserves close attention from investors, in our view. We also worry investors may be growing impatient with outsized losses in the New Initiatives segment.

Chinese super app Meituan (3690 HK) reported Q320 results earlier this week. Total revenue increased by 29% YoY in the period, but core Operating Profit declined by around 23% YoY, mainly due to growing losses in Meituan's New Initiatives segment. Meanwhile, Meituan's largest operating segment, Food Delivery, reported a 33% YoY jump in revenue, driven in part by a 61% increase in advertising and other revenue. However, margins on actual food delivery activity fell sharply compared to both Q319 and Q220. The reasons for the sharp dip in food delivery margins in Q320 are still unclear to us, but this crucial source of profits deserves close attention from investors, in our view. We also worry investors may be growing impatient with outsized losses in the New Initiatives segment.

Meituan: 'Delivery Margin' Dipped in Q3 | How Patient Will Investors Be with 'New Initiatives'?

Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Private Capital Markets

Tatas, India's leading Conglomerate business group, is <a href="https://www.bloomberg.com/news/articles/2020-12-02/tata-said-near-deal-to-buy-alibaba-backed-indian-online-grocer?sref=SVEekGzB" target="_blank" rel="noopener">reportedly</a> in talks to acquire 80% stake in the country's leading Online grocery vertical Bigbasket, where <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> holds upto 30% of ownership stake. India's Retail sector has been a hot bed of M&amp;A activity (and litigations) involving  the big and mighty over the recent months. India's nascent online grocery retail nearly doubled in sales this year thanks to COVID-led disruptions in physical retail. Existing online verticals, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> backed Bigbasket and <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> backed Grofers were reportedly planning a fresh round of  fund raising to build up infrastructure to cater to the swelling demand and counter rising competition. However, all's not been well with overseas fund raising in India. In the detailed note below, we look at (1) Reported deal specifics and valuation (2) Likely Rationale behind the deal (3) India's nascent online grocery landscape and (4) how COVID and consolidation have been impacting India's e-grocery sector.

Tatas, India's leading Conglomerate business group, is reportedly in talks to acquire 80% stake in the country's leading Online grocery vertical Bigbasket, where Alibaba Group (BABA US) holds upto 30% of ownership stake. India's Retail sector has been a hot bed of M&amp;A activity (and litigations) involving  the big and mighty over the recent months. India's nascent online grocery retail nearly doubled in sales this year thanks to COVID-led disruptions in physical retail. Existing online verticals, Alibaba Group (BABA US) backed Bigbasket and Softbank Group (9984 JP) backed Grofers were reportedly planning a fresh round of  fund raising to build up infrastructure to cater to the swelling demand and counter rising competition. However, all's not been well with overseas fund raising in India. In the detailed note below, we look at (1) Reported deal specifics and valuation (2) Likely Rationale behind the deal (3) India's nascent online grocery landscape and (4) how COVID and consolidation have been impacting India's e-grocery sector.

BABA Backed BigBasket to Go to TATAs: Round 2 of India Retail Sector M&A

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Wish is getting ready to complete its IPO in the U.S. by the end of this year. Wish is among the four major U.S. tech related IPOs, including Airbnb, DoorDash, and Roblox that are trying to complete their IPOs by the end of this year. All four of these IPOs are outstanding companies with superior business models. DoorDash and Airbnb are seeking $30 billion or more in valuation. Wish is seeking valuation in the $25 billion to $30 billion or more, and Roblox's IPO could fetch at least $10 billion to $15 billion or more. In other words, the U.S. tech IPO market is likely to end with a Bang rather than a Whimper. Wish has put an IPO placeholder at $1 billion but this figure is likely to be revised up materially.Wish is an e-commerce platform founded by an ex-Google engineer Piotr Szulczewski (CEO) and Danny Zhang (former CTO). These two founders are college buddies from the University of Waterloo.<a href="https://www.forbes.com/sites/parmyolson/2019/03/13/meet-the-billionaire-who-defied-amazon-and-built-wish-the-worlds-most-downloaded-e-commerce-app/" target="_blank" rel="noopener"> Szulczewski</a> was 11 years old when his parents immigrated to Canada from Poland when the Soviet Union collapsed. Early on his career, the founder Piotr Szulczewski worked at Google for about a decade, including spending some time in South Korea. Szulczewski left Google in 2009 and formed Wish a year later. Back in 2016, Amazon gave an interest to acquire Wish (amount unspecified) but Szulczewski turned it down. Good for him since he is now worth a lot more than if he had taken that offer.Wish's is focused on serving customers whose number one priority is price.

Wish is getting ready to complete its IPO in the U.S. by the end of this year. Wish is among the four major U.S. tech related IPOs, including Airbnb, DoorDash, and Roblox that are trying to complete their IPOs by the end of this year. All four of these IPOs are outstanding companies with superior business models. DoorDash and Airbnb are seeking $30 billion or more in valuation. Wish is seeking valuation in the $25 billion to $30 billion or more, and Roblox's IPO could fetch at least $10 billion to $15 billion or more. In other words, the U.S. tech IPO market is likely to end with a Bang rather than a Whimper. Wish has put an IPO placeholder at $1 billion but this figure is likely to be revised up materially.Wish is an e-commerce platform founded by an ex-Google engineer Piotr Szulczewski (CEO) and Danny Zhang (former CTO). These two founders are college buddies from the University of Waterloo. Szulczewski was 11 years old when his parents immigrated to Canada from Poland when the Soviet Union collapsed. Early on his career, the founder Piotr Szulczewski worked at Google for about a decade, including spending some time in South Korea. Szulczewski left Google in 2009 and formed Wish a year later. Back in 2016, Amazon gave an interest to acquire Wish (amount unspecified) but Szulczewski turned it down. Good for him since he is now worth a lot more than if he had taken that offer.Wish's is focused on serving customers whose number one priority is price.

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>The revenue growth rate continued to recover to 29% YoY in 3Q20.</li>
<li>However, the stock price has risen by 180% in the past 7 months.</li>
<li>The operating margin decreased if deducting a value change in investment.</li>
<li>The aggressively expanding business, “Meituan Insta-shopping” (美团闪购), is competing with Alibaba (BABA) and JD.com (JD).</li>
</ul>


The revenue growth rate continued to recover to 29% YoY in 3Q20.
However, the stock price has risen by 180% in the past 7 months.
The operating margin decreased if deducting a value change in investment.
The aggressively expanding business, “Meituan Insta-shopping” (美团闪购), is competing with Alibaba (BABA) and JD.com (JD).


Meituan (3690 HK): Good News, Recovery Continued in 3Q20, Bad News, Overvalued

Alpha-Centric ESG Research

Kyle Rudden

In past Insights, I have covered Senate Bill 945, titled the Holding Foreign Companies Accountable Act (aka the "delisting Chinese stocks act"). In two reports, I laid out my thesis as to why passage of S945 is unlikely during the current session of Congress. Those two reports are:<ul>
<li><a href="https://www.smartkarma.com/insights/delisting-deceitful-chinese-companies-act-not-a-slam-dunk-and-has-more-bark-than-bite-if-it-passes" target="_blank" data-smartkarma-citation="insights:40025" rel="noopener">"Delisting Deceitful Chinese Companies Act" Not a Slam Dunk and Has More Bark Than Bite if It Passes</a></li>
<li>
<a href="https://www.smartkarma.com/insights/delisting-deceitful-chinese-companies-act-update-purgatory-subtexts-and-laughing-to-the-bank" target="_blank" data-smartkarma-citation="insights:41144" rel="noopener">"Delisting Deceitful Chinese Companies Act" (Update): Purgatory, Subtexts, and Laughing to the Bank</a> </li>
</ul>I still feel that the passage of S945 is more unlikely than likely, but there are recent developments surrounding this issue that warrant an update. So, here it is. This Insight briefly discusses two of those developments pertaining this bill, and delisting more generally. Specifically, they are:<ol>
<li>SEC pushing its own regulation akin to S945, which it hopes to formally propose by year end.</li>
<li>The House of Representative voting on S945, scheduled for this week (Wednesday U.S. time)</li>
</ol>

In past Insights, I have covered Senate Bill 945, titled the Holding Foreign Companies Accountable Act (aka the "delisting Chinese stocks act"). In two reports, I laid out my thesis as to why passage of S945 is unlikely during the current session of Congress. Those two reports are:
"Delisting Deceitful Chinese Companies Act" Not a Slam Dunk and Has More Bark Than Bite if It Passes

"Delisting Deceitful Chinese Companies Act" (Update): Purgatory, Subtexts, and Laughing to the Bank 
I still feel that the passage of S945 is more unlikely than likely, but there are recent developments surrounding this issue that warrant an update. So, here it is. This Insight briefly discusses two of those developments pertaining this bill, and delisting more generally. Specifically, they are:
SEC pushing its own regulation akin to S945, which it hopes to formally propose by year end.
The House of Representative voting on S945, scheduled for this week (Wednesday U.S. time)


Update On "Delisting Chinese Stocks Act" – SEC Activity and a House Vote This Week

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba (BABA US)

Meituan: 'Delivery Margin' Dipped in Q3 | How Patient Will Investors Be with 'New Initiatives'?

Meituan posted strong top-line growth in Q320, but core profitability dipped. We are concerned about 'delivery margin' and wonder how long...

Tracking Traffic

BABA Backed BigBasket to Go to TATAs: Round 2 of India Retail Sector M&A

Alibaba backed India eGrocer, BigBasket, to be sold to Tatas. Reported valuation multiples imply a discount vs last round of funding. Despite...

Devi Subhakesan

Wish IPO Preview

Wish has become the most downloaded global shopping app for each of the last three years. Wish is one of the most highly anticipated IPOs in the...

Douglas Kim

Meituan (3690 HK): Good News, Recovery Continued in 3Q20, Bad News, Overvalued

The revenue growth rate continued to recover to 29% YoY in 3Q20. However, the stock price has risen by 180% in the past 7 months.

Ming Lu

Update On "Delisting Chinese Stocks Act" – SEC Activity and a House Vote This Week

I have published several Insights on the Senate's Holding Foreign Companies Accountable Act, explaining why I believe it will not pass. That's...

Kyle Rudden

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