Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

Earlier this month, struggling Chinese electrical appliance retailer, <a href="https://www.smartkarma.com/entities/gome-retail-holdings-ltd" target="_blank" data-smartkarma-citation="entities:170:1" rel="noopener">Gome Electrical Appliances (493 HK)</a> repurchased 5 million shares at a price range of HK$ 0.89-0.90 per share, 44-45% discount to the past five-year high share price attained following <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>’s and <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a>’s capital injection in 2Q20.Buybacks are not a regular part of shareholder returns of Gome Retail and they have only done share buybacks when the share price has declined 25% or more during a short time frame. Most of the times, Gome Retail's share buybacks managed to temporarily maintain the share price but have failed to make an impact on the medium-term direction. Moreover, the latest share buyback is immaterial/symbolic, and the company’s current financial difficulties prevent it from conducting a share buyback of a considerable size capable of making a significant impact to the share price.Gome Retail needs money urgently to finance debt falling due in the next 8 months and banks may be unwilling to lend more money to a struggling business with insufficient cash flows to service debt.However, Gome Retail is strategically important to both Pinduoduo and JD.com and the two e-commerce giants could be biding time till Gome Retail’s shares hit rock bottom before going to war against each other to acquire the struggling electrical appliance retailer.

Earlier this month, struggling Chinese electrical appliance retailer, Gome Electrical Appliances (493 HK) repurchased 5 million shares at a price range of HK$ 0.89-0.90 per share, 44-45% discount to the past five-year high share price attained following JD.com (HK) (9618 HK)’s and Pinduoduo (PDD US)’s capital injection in 2Q20.Buybacks are not a regular part of shareholder returns of Gome Retail and they have only done share buybacks when the share price has declined 25% or more during a short time frame. Most of the times, Gome Retail's share buybacks managed to temporarily maintain the share price but have failed to make an impact on the medium-term direction. Moreover, the latest share buyback is immaterial/symbolic, and the company’s current financial difficulties prevent it from conducting a share buyback of a considerable size capable of making a significant impact to the share price.Gome Retail needs money urgently to finance debt falling due in the next 8 months and banks may be unwilling to lend more money to a struggling business with insufficient cash flows to service debt.However, Gome Retail is strategically important to both Pinduoduo and JD.com and the two e-commerce giants could be biding time till Gome Retail’s shares hit rock bottom before going to war against each other to acquire the struggling electrical appliance retailer.

Equity Bottom-Up

Embattled by the entry of e-commerce to retail consumer electronics, <a href="https://www.smartkarma.com/entities/gome-retail-holdings-ltd" target="_blank" data-smartkarma-citation="entities:170:1" rel="noopener">Gome Electrical Appliances (493 HK)</a>, China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 136.1 billion is completely reliant on China’s social commerce growth to turnaround its struggling consumer electronics (brick and mortar) business.We discuss China’s social commerce growth prospects and its impact on Gome Retail below.

Embattled by the entry of e-commerce to retail consumer electronics, Gome Electrical Appliances (493 HK), China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 136.1 billion is completely reliant on China’s social commerce growth to turnaround its struggling consumer electronics (brick and mortar) business.We discuss China’s social commerce growth prospects and its impact on Gome Retail below.

Gome's Gamble on Social Commerce Is Unlikely to Generate Sufficient Margins

<a href="https://www.smartkarma.com/entities/gome-retail-holdings-ltd" target="_blank" data-smartkarma-citation="entities:170:1" rel="noopener">Gome Electrical Appliances (493 HK)</a> is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 136.1 billion. Revenue has declined at an annual compound rate of 8.1% over the past three years as the company’s traditional retail store model has lost out to E-commerce competition.The company is currently on a restructuring phase, transitioning away from the traditional brick and mortar electronics retail model. The new initiatives are encouraging with over 100% GMV growth across many of the new business models. These growth avenues have captured the eye of the Chinese E-commerce giants, <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>. In April 2020, Pinduoduo invested $200 million in 3-year 5% coupon convertible bonds (CBs) at a conversion price of HKD 1.215 per share. JD.com followed with a $100 million investment in 3-year 5% coupon convertible bonds (CBs) at a conversion price of HKD 1.255 per share.We discuss Gome Retail's new initiatives below.

Gome Electrical Appliances (493 HK) is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 136.1 billion. Revenue has declined at an annual compound rate of 8.1% over the past three years as the company’s traditional retail store model has lost out to E-commerce competition.The company is currently on a restructuring phase, transitioning away from the traditional brick and mortar electronics retail model. The new initiatives are encouraging with over 100% GMV growth across many of the new business models. These growth avenues have captured the eye of the Chinese E-commerce giants, Pinduoduo (PDD US) and JD.com Inc (ADR) (JD US). In April 2020, Pinduoduo invested $200 million in 3-year 5% coupon convertible bonds (CBs) at a conversion price of HKD 1.215 per share. JD.com followed with a $100 million investment in 3-year 5% coupon convertible bonds (CBs) at a conversion price of HKD 1.255 per share.We discuss Gome Retail's new initiatives below. 

Gome Retail: Comprehensive Transformation in Process, Too Early to Call Success/Failure

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 class="">
<li>JD.com (JD) acquired 100% of Five Star, a store chain of household appliance.</li>
<li>Xiaomi (1810 HK)’s smartphone sales decreased by 35% YoY in 2Q20.</li>
<li>The State Post Bureau of China announced that the revenue from express parcel increased by 23.5% YoY in 2Q20 versus a decrease of 0.6% YoY in 1Q20.</li>
<li>The National Development and Reform Commission requires internet broadband providers to reduce prices by 15% for corporate users.</li>
</ul>


JD.com (JD) acquired 100% of Five Star, a store chain of household appliance.
Xiaomi (1810 HK)’s smartphone sales decreased by 35% YoY in 2Q20.
The State Post Bureau of China announced that the revenue from express parcel increased by 23.5% YoY in 2Q20 versus a decrease of 0.6% YoY in 1Q20.
The National Development and Reform Commission requires internet broadband providers to reduce prices by 15% for corporate users.


China Internet Weekly (3Aug2020): JD Acquired Appliance Store, Xiaomi Phone Sales Plunged

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Quantitative Analysis

Hong Kong SFC reported on today for aggregate short position on Jul 03. The aggregate short value for equities increased by $2,633m (+4.4%) WoW and increased by $2,337m (+3.9%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($9,327m, +8.1% WoW), Tencent Holdings Limited/700 HK($3,518m, +5.2% WoW), Meituan Dianping/3690 HK($2,252m, -5.4% WoW), Zhongsheng Group Holdings Limited/881 HK($1,292m, +8.7% WoW), Xiaomi Corporation/1810 HK($1,068m, +8.5% WoW).<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/145/455/original/image_21898409821594522544123.png?1594522545" class="editor-image img-responsive" data-smartkarma-image-id="145455"></figure>

Hong Kong SFC reported on today for aggregate short position on Jul 03. The aggregate short value for equities increased by $2,633m (+4.4%) WoW and increased by $2,337m (+3.9%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($9,327m, +8.1% WoW), Tencent Holdings Limited/700 HK($3,518m, +5.2% WoW), Meituan Dianping/3690 HK($2,252m, -5.4% WoW), Zhongsheng Group Holdings Limited/881 HK($1,292m, +8.7% WoW), Xiaomi Corporation/1810 HK($1,068m, +8.5% WoW).

HK Short Report: Meituan Short Stayed at USD 2.2bn

China

GOME Retail Holdings Limited retails household appliances. The Company provides televisions, washing machines, computers, mobile phones, digital devices, air conditioners, and other products. GOME Retail Holdings also provides equipment repairing, recycling, and other services.

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GOME Retail Holdings (493 HK)

Gome Retail: Easy Prey

Gome Retail is strategically important to both Pinduoduo and JD.com and the two e-commerce giants could be biding time till Gome’s shares hit rock...

Oshadhi Kumarasiri

Gome Retail: Comprehensive Transformation in Process, Too Early to Call Success/Failure

Gome Electrical Appliances (493 HK) is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 136.1 billion....

Oshadhi Kumarasiri

China Internet Weekly (3Aug2020): JD Acquired Appliance Store, Xiaomi Phone Sales Plunged

JD.com (JD) acquired 100% of Five Star, a store chain of household appliance. Xiaomi (1810 HK)’s smartphone sales decreased by 35% YoY in...

Ming Lu

HK Short Report: Meituan Short Stayed at USD 2.2bn

Hong Kong SFC reported on today for aggregate short position on Jul 03. The aggregate short value for equities increased by $2,633m (+4.4%) WoW and...

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Gome Retail: Easy Prey

Gome Retail is strategically important to both Pinduoduo and JD.com and the two e-commerce giants could be biding time till Gome’s shares hit rock...

Oshadhi Kumarasiri

Gome's Gamble on Social Commerce Is Unlikely to Generate Sufficient Margins

After the Australian government blocked $kirin’s proposed sale of Lion Diary & Drinks (LDD) to China Mengniu Dairy in late August, Kirin...

Oshadhi Kumarasiri

Gome Retail: Comprehensive Transformation in Process, Too Early to Call Success/Failure

Gome Electrical Appliances (493 HK) is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 136.1 billion....

Oshadhi Kumarasiri

China Internet Weekly (3Aug2020): JD Acquired Appliance Store, Xiaomi Phone Sales Plunged

JD.com (JD) acquired 100% of Five Star, a store chain of household appliance. Xiaomi (1810 HK)’s smartphone sales decreased by 35% YoY in...

Ming Lu

HK Short Report: Meituan Short Stayed at USD 2.2bn

Hong Kong SFC reported on today for aggregate short position on Jul 03. The aggregate short value for equities increased by $2,633m (+4.4%) WoW and...

Ke Yan, CFA, FRM