In this briefing:
- China Internet Weekly (13Jul2020): Alibaba’s Freshippo and Ele.me Exploring Cities and Businesses
- FMCG Is the Next Big Growth Driver & Battleground for China E-Commerce; Big Tech Moves In Force
- ME2ZEN IPO: Absence of Local Pension Funds Vs. Market Friendly Pricing
- Softbank Reverse from Long to Short Target
- King Yuan Electronics Co(2449 TT) – Time To Buy On Robust Demand For 5G, AI, and CMOS Image Sensor
1. China Internet Weekly (13Jul2020): Alibaba’s Freshippo and Ele.me Exploring Cities and Businesses
- Alibaba (BABA)’s Freshippo opened two “Freshippo-mini” stores in Beijing.
- Alibaba (BABA)’s Ele.me began to deliver goods other than cooked food.
- The smart phone shipment decreased by 16.6% YoY in June, worse than 11.8% YoY in May.
FMCG E-Comm is China Tech’s Next Big Growth Driver & Battleground
At a time when overall retail e-commerce in China has already reached 44% penetration, e-commerce penetration for fast-moving consumer goods (“FMCG”) still lags behind tremendously. According to Euromonitor International, only 6.3% of fresh foods and 8.8% of alcoholic beverages were purchased online in 2019.
This gap represents a major growth opportunity as consumers, having grown accustomed to the convenience and safety of ordering FMCG products online, are now permanently shifting purchasing behaviors.
Already, Chinese Tech giants such as Alibaba and JD.com have moved in force – doubling down on their FMCG investments via Freshippo and JD Supermarket. Tencent is also making its own moves – investing in grocery startup Xingsheng Youxuan and valuing it at US$3bn.
Investors have taken note of this upcoming structural trend and have also moved in size. As seen in the chart below, companies with exposure to FMCG e-commerce have handily beat the broader market with names like Pinduoduo and Meituan Dianping doubling in value in just two months. Dada Nexus, an online grocery firm backed by JD.com, also chose to IPO in early June despite the COVID backdrop – its stock price has since soared by 100%+.
Read our previous FMCG E-Commerce Insights:
- Why Near Term Headwinds Don’t Matter: FMCG E-Comm Footholds to Thrive Post-COVID
- JD 1Q20: Strong All-Around Beat as FMCG Resilience Shines, Look Towards the 618 Shopping Festival
First, here is an overview of ME2ZEN’s second IPO attempt.
It plans to offer 3.2M shares (52% primary and 48% secondary). The total offering represents 28.74% of the total shares at a 14.94% capital increase rate.
Mirae is working as a sole banker with a firm commitment.
The indicative price band is at ₩21,000~27,000, which gives an implied market cap of ₩289.9~372.7bil.
July 30~31 will be for book-building, followed by the allotment on August 4. The following day will be a subscription. The payment date is August 7.
Once again, the float will be tight on this one. A total of 72.48% shares will be in a lock-up for one month to three years. Of those, 65.26% is for more than six months.
Softbank Group (9984 JP) has witnessed a sharp rise from our recent 4,400 long entry and nearing the ideal 6,600 target representing the top end of the intermediate expanding wedge range. We made a bull call near lower wedge support at 2,800.
Recent breakout point at 5,900 will act as pivot support that will induce a reaction back upward.
RSI shows synergy with dual tops in this zone to mark key cycle tops which fits with a top near 6,600. RSI is also forming a rising wedge that has a better than 70% probability of breaking down amid bear divergence.
Macro pivots are 6,800 and 4,900 as the expanding wedge defines a clear range (6,800 and 2,500).
5. King Yuan Electronics Co(2449 TT) – Time To Buy On Robust Demand For 5G, AI, and CMOS Image Sensor
In our view, KYEC embraces 5G migration cycle at infrastructure base stations and smartphones, as well as many other IoT devices, RF filter/PA, CMOS image sensors and server chips. We expect KYEC to post double digit YoY revenue growth in 2020. As such, we initiate coverage on KYEC with a Buy call and 12-month TP of TWD50.
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