In this briefing:
- ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)
- Ab InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
- Trade War Uncertainty Bites into Investment Spending and Production
- China Rail: Paths to Financial Viability for CRC
- ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)
1. ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)
In our first insight (link here) covering ByteDance, we discuss ByteDance’s app matrix, the differentiating factors of ByteDance and the key difference between its Jinri Toutiao app and Tencent News.
In this insight, we will discuss in details its next blockbuster app, Tiktok. Similar to Jinri Toutiao, it is utilizing AI technology for content curation. In addition to that, the app also uses AI technology to beautify content producers. Compared to text-based content, the short-video content is more viral.
In the next insight, we will look at the company’s overseas expansion, past series of financing and valuation.
2. Ab InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China
Anheuser Busch Inbev Sa/Nv (ABI BB), the world’s largest brewer, is looking to list its Asian operations in order to lighten its debt burden. The listing will probably be in Hong Kong and the company could raise around US$5bn at a valuation of around US$70bn, as per media reports, which will make it one of the largest listings for 2019. Earlier this month, the company picked JPM and MS to lead the deal.
When listed, the company will be the third biggest brewer in China and the largest in South Korea and Australia.
While we have to wait for the application proof to be filed later this year to get more details on the operations, in this insight I’ll take a early look at the Asian operations using the data already available in the parent’s annual and quarterly reports. I’ll primarily address where the business is now and how it has shaped up over the past few years.
3. Trade War Uncertainty Bites into Investment Spending and Production
Import elasticities. Ease of transferring business between countries. Reliability of alternative supply chains. Time taken to relocate production. The list of unknowns on how easily companies could relocate production from China goes on and on but the bottom line is that uncertainty has been raised and that is bad news for global growth.
In Reality Check: China and the US Trade War, we wrote “Even if the Trade War ends tomorrow, the damage has already been done”.
4. China Rail: Paths to Financial Viability for CRC
CRC (China Railway Corporation, previously known as MOR) has been questioned about its extremely high liability rate and trillions of debts for years. Some experts believe China shall stop HSR (High Speed Railway) construction to reduce the liability in rail system and lower the financial risk of the society. While others believe a high speed rail transportation system is necessary and would improve the efficiency of the society, because China is the third largest country in the world by geographic area.
In this report, we list three possible solutions for CRC’s liability issue: to increase revenue to cover the Capex; to increase funding from local governments or private sectors; to reduce annual rail investment.
Conclusion:
In our view, China will stop expanding its rail system sooner or later. The main frame of HSR is completed. Only some extension lines are required. If CRC doesn’t start building high speed rails for freight transportation, which was mentioned in 2012-2013, China’s annual rail investment might be reduced after 2023.
Before that, CRC is capable of remain its existing investment amount unchanged, without further increasing the financial risk of China’s banking sector. To reduce its debts, increasing rail investment funding proportion from local governments is still an easier option than increasing CRC’s net profit. Once China reduces its rail investment, CRC would be able to reduce its net gearing significantly.
5. ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)
ByteDance, an emerging TMT player in China and one of the challengers to the BAT’s dominance in China, is said to be preparing for 2019 listing. It will be the largest Chinese TMT listing this year as the company was valued at USD 75 billion in the pre-IPO fundraising, closed in October 2018.
In this insight, we will discuss ByteDance’s business, in particular, how the text-based media distribution platform Jinri Toutiao (今日头条) built the foundation of the company, and paved ways for the short-video distribution platform Watermelon Video (西瓜视频), Volcano Video (火山视频), and Tiktok (抖音).
In our next insight, we will discuss how Tiktok became successful and the company’s overseas expansion.
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