In this briefing:
- China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes
- Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
- Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
- NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
- A Few Thoughts on Weak February China Auto Sales – Lunar Holidays Don’t Explain It in SAAR Terms
1. China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes
The data released by NBS over the past 2 days shows the market for new home sales in China continues to slow down, with volumes in decline on a year-to-date year-on-year measure for January-February. Price growth is slowing month-on-month, though by one measure still rising faster year-on-year.
2. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
The last three years have been characterized by significant M&A activity in the upstream oil and gas industry. As the oil cycle recovered from the price bottom in January 2016, lower asset prices and corporate valuations created opportunities for the companies with a stronger balance sheet to grow inorganically while their weaker competitors were forced to downsize their portfolios. 2018, in particular, has seen a surge of corporate M&A which has been driving consolidation in the industry. This insight examines the trends that have shaped the M&A markets since 2016 with a closer view of 2018 and the outlook for 2019.
Exhibit 1: M&A volume compared to the E&P index and the oil price since 2016
![](https://static-prod.smartkarma.com/images/media/000/082/014/original/exhibit1volumemonthly.png?1552548943)
3. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
Koolearn (1797 HK) is looking to raise up to US$S234m in its upcoming IPO. We have previously covered the company in:
- Koolearn (新东方在线) Pre-IPO – Profitable Online Edu Company but Poor Sentiment Weighs
- New Regulatory Tightening on Online Education Reads Badly on Koolearn IPO
In this insight, we will look at the updates on financials and operating metrics, compare it to other listed online education companies, and run the deal through our framework.
The increase in spending on marketing has not yielded the intended results as the growth rates of student enrollment and gross billings slowing down. Furthermore, aggressive spending behavior is similar to that of STG and LAIX and both companies did not perform well post listing.
4. NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
GDS Holding, the largest carrier-neutral, cloud-neutral data centre operator in China, is raising USD 400 million from a private placement. The deal was launched last night (US time) post the company’s results announcement. In this insight, we will cover:
- Details of the deal
- Key takeaways from its 4Q2018 results
- USD 150 million investment by Ping An
- Its shareholders
- The score in our Placement Framework
5. A Few Thoughts on Weak February China Auto Sales – Lunar Holidays Don’t Explain It in SAAR Terms
February 2019 had 2 more selling days than February 2018, and 5 less selling days than in January 2019. While CAAM and other media reports were quick to point to the lunar holidays as the main culprit behind the sequential and YoY fall in auto demand, the lunar holiday effect is taken into consideration when the sales figures are seasonally adjusted. According to our observations China’s February SAAR fell sequentially to 21.7m units from 24.8m units January (-12.3% MoM), and from 27.7m units in February 2018 (-21.4% YoY).
Over the past few months we did not see much macro signals that would point to an imminent collapse in selling rates to the level of February’s observation so we would wait for the March data points to assess how much truth there may to suggestions that car buyers may be holding back in anticipation of another round of government stimuli. In the meantime, we would not ascribe too much credence to talks about lunar holidays or shrinking shadow banking systems as there is very little statistical evidence that would support such anecdotal assertions.
![](https://static-prod.smartkarma.com/images/media/000/081/963/original/Screen%20Shot%202019-03-13%20at%206.01.24%20PM.png?1552525296)
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