In this briefing:
- Uber IPO: Its Sprawling Empire And Battle Lines (Part 3)
- Monthly Geopolitical Comment: Redrafting of Global Map of Political Alliances to Continue in 2019
- 58.com Inc. (NYSE: WUBA): Regulatory Pressure Has Long Term Implications
- Autonomous Driving. Waymo Leading The Charge With Ten Million Miles Driven And Counting
- Harbin Electric: The Price Is Not Right
1. Uber IPO: Its Sprawling Empire And Battle Lines (Part 3)
Although Uber aims to be an Amazon for transport, we will focus on the ride-hailing market in part 3 of this series. Here, we try to answer the following questions:
- What are the indicative ride-hailing market shares of Uber vs Lyft in North America?
- What is Uber’s share in other key countries?
- What are the lawsuits investors should watch out for?
- How do Uber’s revenue drivers compare with Lyft’s?
- What are the timelines and key figures for both companies’ IPOs?
This is the third note in a series about the expected 2019 IPO of global ride-hailing giant Uber Technologies (0084207D US) and Lyft. Please read the earlier two pieces in the series for better contexts:
Uber IPO Preview: Its Sprawling Empire and Battle Lines (Part 1) written by me.
Uber IPO Preview: Fast-Growing Uber Eats Has Become a Material Part of Uber (Part 2) written by Daniel Hellberg
2. Monthly Geopolitical Comment: Redrafting of Global Map of Political Alliances to Continue in 2019
The year 2018 has proven tumultuous for global markets. Rapidly changing geopolitical priorities of the US, an erstwhile hegemon, have played a role no less significant than the withdrawal of liquidity by leading central banks or US monetary policy tightening. The US has openly declared that it is in a state of “cold war” with China. Despite the recent truce, signs are abundant that the confrontation between the two global superpowers will continue into 2019 and beyond. In 2019, we expect more countries to find themselves in a position where they must choose who they want to side with, the US or China. There are other tectonic shifts, too, which are causing re-alignment of global geopolitical alliances.
3. 58.com Inc. (NYSE: WUBA): Regulatory Pressure Has Long Term Implications
● We notice that Anjuke’s Oct.-Nov. traffic declined. We attribute this decline to the tightening of registration requirement in various cities, which will reduce the number of housing leads on WUBA platform;
● We, however, believe new home business will deliver strong revenue for WUBA this year, contributing Rmb2bn in revenues by our estimate;
● We rate the stock Buy and cut TP from US$84 to US$79.
4. Autonomous Driving. Waymo Leading The Charge With Ten Million Miles Driven And Counting
Waymo CEO John Krafcik made some bold decisions after taking the helm at Alphabet‘s self-driving project in September 2015. Chief among them was the fact that the company abandon its plans for Level 3 automated driving and focus exclusively on levels 4 & 5. Furthermore, he decreed that Waymo would no longer manufacture its own vehicles but would instead integrate their technology into those of other automakers. Three years later, those decisions would appear to be finally paying off.
On October 10 2018, Waymo reached a significant milestone having completed 10 million self-driving miles across 25 cities in the US. While their first million self-driving miles took 18 months to complete, Waymo now clocks up over a million self-driving miles per month. The company also recently announced the launch of its robo taxi service in Phoenix, Arizona and looks set to quickly follow suit in California. Plans to extend its self-driving technology beyond robotaxis, most notably for trucks and last-mile transportation solutions are also in the works. Furthermore, the company has begun laying down a framework of innovative B2B revenue models which should help accelerate the speed with which they can eventually monetize their technology.
It hasn’t been smooth sailing all the way for Waymo however. Earlier this year, the company was derided for the driving style of its autonomous vehicles and faced the criticism that its driverless cars continue to have safety drivers. There was also an embarrassing incident where one of those very safety drivers caused the self-driving car he was monitoring to hit a motorcyclist when he attempted to take control of the vehicle. According to Waymo’s own analysis of the vehicle log files, the accident would not have happened had he not intervened.
With ten million self-driving miles under their belt and a thoughtful, strategic approach to monetizing their technology beginning to emerge, Waymo remains firmly ahead of their peers in leading the autonomous driving charge.
5. Harbin Electric: The Price Is Not Right
As speculated in Harbin Electric Expected To Be Privatised, Harbin Electric Co Ltd H (1133 HK) has now announced a privatisation Offer from parent and 60.41%-shareholder Harbin Electric Corporation (“HEC”) by way of a merger by absorption.
The Offer price of $4.56/share, an 82.4% premium to last close, has been declared final. The price corresponds to the subscription of 329mn domestic shares (~47.16% of the existing issued domestic shares and ~24.02% of the existing total issued shares) @$4.56/share by HEC in January this year.
Of greater significance, the Offer price is a 37% discount to HE’s net cash of $7.27/share as at 30 June 2018. Should the privatisation be successful, this Offer will cost HEC ~HK$3.08bn, following which it can pocket the remaining net cash of $9.3bn PLUS the power generation equipment manufacturer business thrown in for free.
On pricing, “fair” to me would be something like the distribution of net cash to zero then taking over the company on a PER with respect to peers. That is not happening. It will be difficult to see how independent directors can justify recommending an Offer to shareholders at any price which gave cash less cavalier than cash.
Dissension rights are available, however, what constitutes a “fair price” under those rights, and the timing of the settlement under such rights, are not evident.
As all PRC approvals have been obtained, this transaction may complete earlier than prior mergers by absorption, which have taken 6-8 months from the initial announcement.
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