In this briefing:
- Meituan Dianping: Time to Bail? Relax, Core Business Progressing Toward Profitability
- Ruhnn IPO Preview: Hard to Stay Red-Hot for Long
1. Meituan Dianping: Time to Bail? Relax, Core Business Progressing Toward Profitability
- Conference call with Meituan Dianping (3690 HK) reveals that ballooning losses from new initiatives (incl. one-off expenses) largely contributed to record quarterly EBIT losses in 4Q18.
- Importantly, this masks Meituan Core’s (combined food delivery and in-store, hotel & travel divisions) continued progress toward profitability.
- Management is bullish on every division’s outlook in 2019, particularly guiding for 1) balanced growth and profitability strategy for food delivery and 2) disciplined investments in new initiatives.
- Meituan attractively trades at 2.9x 2019E P/S, only around half of peers’ valuation (5.5x).
2. Ruhnn IPO Preview: Hard to Stay Red-Hot for Long
Ruhnn Holding Ltd (RUHN US) is an e-commerce platform which drives sales through KOLs (key opinion leaders). Ruhnn is the largest internet KOL facilitator in China as measured by revenue, the number of online stores and GMV in 2018 according to Frost & Sullivan. Ruhnn is backed by Alibaba Group Holding (BABA US), an 8.6% shareholder, and is seeking to raise $200 million through a Nasdaq IPO.
However, Ruhnn’s rhetoric does not match its financial performance. On balance, we are inclined to give this IPO a pass.
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