China Archives | Page 117 of 154 | Smartkarma

In this briefing:

1. ECM Weekly (16 March 2019) – Embassy Office REIT, Tiger Brokers, Dongzheng Auto, Koolearn, CanSino
2. Moore’s Law May Not Be Dead, After All
3. RRG Weekly – Is Modi Government Cooking the Books? Brexit Risks Rise. South Africa Could Surprise
4. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?
5. Tesla  – Now We Know The Y, But Not the How

1. ECM Weekly (16 March 2019) – Embassy Office REIT, Tiger Brokers, Dongzheng Auto, Koolearn, CanSino

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.

Accuracy Rate:

Our overall accuracy rate is 72.4% for IPOs and 63.7% for Placements 

(Performance measurement criteria is explained at the end of the note)

New IPO filings

• FriendTimes Inc. (Hong Kong, >US$100m)
• Frontage (Hong Kong, re-filed)

Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.

News on Upcoming IPOs

• UBS and Rivals to Pay $100 Million to Settle Hong Kong IPO Cases
• Chinese Luxury Car Finance Firm Seeks $428 Million in Hong Kong IPO
• Online Educator Koolearn to Raise up to $233 Million in Hong Kong IPO
• Resurgence in Indian IPO market likely only after general elections
• Homeplus K-REIT Withdraws $1.5 Billion Korean IPO on Weak Demand
• Prospa may revive listing plan after beating prospectus forecasts
• Luckin Coffee chairman said to tap banks for $200m loan in exchange for IPO role

This week Analysis on Upcoming IPO

• Homeplus REIT IPO: A Key Landmark Deal in the History of the Korean REIT Market
• Up Fintech (Tiger Brokers) IPO Quick Take – It’s Not like Futu, Won’t Perform like It Either
• Embassy Office Parks REIT IPO – FY19 Revised Down, Yield Propped up by Zero Coupon Bond
• CanSino Biologics (康希诺) IPO: Valuation Update (Part 3)
• Dongzheng Auto Finance (东正汽车金融) IPO Review – Better off Buying the Parent
• Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending

2. Moore’s Law May Not Be Dead, After All

For years semiconductor makers and investors have worried that Moore’s Law will end.  Although it is not difficult to find proponents of this argument today, this Insight provides evidence that the venerable phenomenon not only is still moving forward, but that it has, in some cases, been moving faster than it has in the past.

3. RRG Weekly – Is Modi Government Cooking the Books? Brexit Risks Rise. South Africa Could Surprise

• Russia: Recent study estimates that unreported activity accounts for about 20% of GDP. Moscow could use this lost tax revenue.
• Singapore: MAS qtrly survey of professional forecasters estimates 2019 GDP growth at 2.5% for this year, down from median estimate of 2.7% in the September survey.
• South Africa: Morgan Stanley is calling for outperformance by South African economy and stocks in the coming months.  Focus on Healthcare and Retail Names)
• India: Modi’s government is accused of politicizing economic data government in a growing debate over the credibility of India’s official growth estimates.

4. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?

Facebook Inc A (FB US) : Mark Zuckerberg sees the light or is facing the WeChat burn? It seems like the whole tilt towards ensuring a more safe, secure environment lies in its play to emulate WeChat…eventually. But first, it needs to address specific issues of data protection, security and privacy that plague the company and possibly think around altering its current revenues via the advertisement model.

The company certainly seems to be moving towards making a token/coin and is even hiring blockchain specialists. Could it look to make a Stablecoin? Work on a M-Pesa model ? Target remittances in countries like India? It seems a long road and arduous road ahead- but it has been dropping directional hints along the way.

Lyft Inc (0812823D US) : Why does Lyft Inc (0812823D US) want to list exactly aside locking in money before the number one player swamps the market ? Could it be regulatory changes on the anvil ? And would those be food for thought for Asia plays – Grabtaxi Holdings Pte (0967655D SP)DiDi Chuxing (1284375D CH)  and Olacabs ?

5. Tesla  – Now We Know The Y, But Not the How

Tesla Motors (TSLA US) unveiled Model Y on, perhaps not coincidentally, March 14th which also is Pi Day. Pi is the fundamental ratio which demonstrates that all circles are related–as Model Y is overwhelmingly related with the seminal Model 3 which contributes 75-80% of the newcomer’s platform and technology.

Which means Model Y may be originating with Model 3’s many inherent problems, as I discussed in Tesla’s Plan B 2.0; Y Not, just as Tesla also is juggling the ramp-up of the newly launched $35,000-base model of Model 3 along with sales expansion into Europe and China as well as building a new plant on a shoestring in Shanghai. All this just as the company also has lurched into a radical new online-only sales model with apparently little if any considered preparation (see Tesla’s New Plan: Buy Before You Try).

No wonder Tesla’s Vice President of Engineering Michael Schwekutsch just quit, an ominous signal.

Another is that Model Y won’t be available until late 2020–at best–which is much later than expected. It’s still not clear when or where Model Y will be in full production or, even more critical, when Tesla will make even a penny of profit on it. Model 3 only recently became marginally profitable, excluding the likely money-losing $35k version, and sales of more profitable but aging Models S and X are in accelerating decline.

And, as I observed last week, Tesla’s track record of long delays in delivering new models coupled with Model 3’s alarming quality and reliability may seriously diminish the hoped-for early bird reservation cash which the company sorely needs to ease its liquidity crunch. At the same time, the pending arrival of Model Y over the next year or so is likely to further dampen already waning demand for Model 3.

In any case, it’s too late for Tesla to preserve profitability in the calamitous first quarter, if not for the full year.

Continue reading for Bond Angle analysis.

In this briefing:

1. Moore’s Law May Not Be Dead, After All
2. RRG Weekly – Is Modi Government Cooking the Books? Brexit Risks Rise. South Africa Could Surprise
3. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?
4. Tesla  – Now We Know The Y, But Not the How
5. China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes

1. Moore’s Law May Not Be Dead, After All

For years semiconductor makers and investors have worried that Moore’s Law will end.  Although it is not difficult to find proponents of this argument today, this Insight provides evidence that the venerable phenomenon not only is still moving forward, but that it has, in some cases, been moving faster than it has in the past.

2. RRG Weekly – Is Modi Government Cooking the Books? Brexit Risks Rise. South Africa Could Surprise

• Russia: Recent study estimates that unreported activity accounts for about 20% of GDP. Moscow could use this lost tax revenue.
• Singapore: MAS qtrly survey of professional forecasters estimates 2019 GDP growth at 2.5% for this year, down from median estimate of 2.7% in the September survey.
• South Africa: Morgan Stanley is calling for outperformance by South African economy and stocks in the coming months.  Focus on Healthcare and Retail Names)
• India: Modi’s government is accused of politicizing economic data government in a growing debate over the credibility of India’s official growth estimates.

3. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?

Facebook Inc A (FB US) : Mark Zuckerberg sees the light or is facing the WeChat burn? It seems like the whole tilt towards ensuring a more safe, secure environment lies in its play to emulate WeChat…eventually. But first, it needs to address specific issues of data protection, security and privacy that plague the company and possibly think around altering its current revenues via the advertisement model.

The company certainly seems to be moving towards making a token/coin and is even hiring blockchain specialists. Could it look to make a Stablecoin? Work on a M-Pesa model ? Target remittances in countries like India? It seems a long road and arduous road ahead- but it has been dropping directional hints along the way.

Lyft Inc (0812823D US) : Why does Lyft Inc (0812823D US) want to list exactly aside locking in money before the number one player swamps the market ? Could it be regulatory changes on the anvil ? And would those be food for thought for Asia plays – Grabtaxi Holdings Pte (0967655D SP)DiDi Chuxing (1284375D CH)  and Olacabs ?

4. Tesla  – Now We Know The Y, But Not the How

Tesla Motors (TSLA US) unveiled Model Y on, perhaps not coincidentally, March 14th which also is Pi Day. Pi is the fundamental ratio which demonstrates that all circles are related–as Model Y is overwhelmingly related with the seminal Model 3 which contributes 75-80% of the newcomer’s platform and technology.

Which means Model Y may be originating with Model 3’s many inherent problems, as I discussed in Tesla’s Plan B 2.0; Y Not, just as Tesla also is juggling the ramp-up of the newly launched $35,000-base model of Model 3 along with sales expansion into Europe and China as well as building a new plant on a shoestring in Shanghai. All this just as the company also has lurched into a radical new online-only sales model with apparently little if any considered preparation (see Tesla’s New Plan: Buy Before You Try).

No wonder Tesla’s Vice President of Engineering Michael Schwekutsch just quit, an ominous signal.

Another is that Model Y won’t be available until late 2020–at best–which is much later than expected. It’s still not clear when or where Model Y will be in full production or, even more critical, when Tesla will make even a penny of profit on it. Model 3 only recently became marginally profitable, excluding the likely money-losing $35k version, and sales of more profitable but aging Models S and X are in accelerating decline.

And, as I observed last week, Tesla’s track record of long delays in delivering new models coupled with Model 3’s alarming quality and reliability may seriously diminish the hoped-for early bird reservation cash which the company sorely needs to ease its liquidity crunch. At the same time, the pending arrival of Model Y over the next year or so is likely to further dampen already waning demand for Model 3.

In any case, it’s too late for Tesla to preserve profitability in the calamitous first quarter, if not for the full year.

Continue reading for Bond Angle analysis.

5. 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.

In this briefing:

1. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
2. NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
3. A Few Thoughts on Weak February China Auto Sales – Lunar Holidays Don’t Explain It in SAAR Terms
4. China Economics:  China’s Strategy on Trade War Has Worked
5. Best World (BEST SP): BT Article, Franchise and KOL

1. 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.

2. 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

3. 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.

4. China Economics:  China’s Strategy on Trade War Has Worked

First, during the past couple of weeks, the most important event regarding the Chinese economy is the China US trade talk.  It is reported that both sides have made a preliminary agreement on trade war truce. It is an extraordinary development.   At the beginning of this China US trade war, most analysts had underestimated the seriousness of this trade conflict. Then after a series of escalations, analysts tend to overestimate this conflict by exploring the possibility of a full-scale conflict between China and US including national security, military and economic competition etc. we agree that China and US are in direct competition in almost every field. The issue is President Trump. He has to deal with the internal issues including the Muller investigation and the Democrats. So far, he has failed to make essential progress in dealing with internal opponents. He also just failed another Kim Trump summit. In our opinion, he is keen to make a deal with China. He is in a much weaker position than President Xi. Although at the beginning President Xi was under some criticism, currently, his authority is with no significant challenge. President Xi has also pretended to be humble when dealing with Trump. In our opinion, China’s strategy, such as buying time by deliberate delays or deceptions, has worked. 

5. Best World (BEST SP): BT Article, Franchise and KOL

Best World International (BEST SP) share price has been hammered due to the recent article in Business Times, although the company has addressed them one by one. The annual meeting that recently took place in their office in Singapore shed some light on the seemingly “new but not so new” franchise business model in China. The company also has started to engage Key Opinion Leaders (KOL) aka social media influencers as part of their social selling campaign. 

In this briefing:

1. RRG Weekly – Is Modi Government Cooking the Books? Brexit Risks Rise. South Africa Could Surprise
2. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?
3. Tesla  – Now We Know The Y, But Not the How
4. China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes
5. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019

1. RRG Weekly – Is Modi Government Cooking the Books? Brexit Risks Rise. South Africa Could Surprise

• Russia: Recent study estimates that unreported activity accounts for about 20% of GDP. Moscow could use this lost tax revenue.
• Singapore: MAS qtrly survey of professional forecasters estimates 2019 GDP growth at 2.5% for this year, down from median estimate of 2.7% in the September survey.
• South Africa: Morgan Stanley is calling for outperformance by South African economy and stocks in the coming months.  Focus on Healthcare and Retail Names)
• India: Modi’s government is accused of politicizing economic data government in a growing debate over the credibility of India’s official growth estimates.

2. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?

Facebook Inc A (FB US) : Mark Zuckerberg sees the light or is facing the WeChat burn? It seems like the whole tilt towards ensuring a more safe, secure environment lies in its play to emulate WeChat…eventually. But first, it needs to address specific issues of data protection, security and privacy that plague the company and possibly think around altering its current revenues via the advertisement model.

The company certainly seems to be moving towards making a token/coin and is even hiring blockchain specialists. Could it look to make a Stablecoin? Work on a M-Pesa model ? Target remittances in countries like India? It seems a long road and arduous road ahead- but it has been dropping directional hints along the way.

Lyft Inc (0812823D US) : Why does Lyft Inc (0812823D US) want to list exactly aside locking in money before the number one player swamps the market ? Could it be regulatory changes on the anvil ? And would those be food for thought for Asia plays – Grabtaxi Holdings Pte (0967655D SP)DiDi Chuxing (1284375D CH)  and Olacabs ?

3. Tesla  – Now We Know The Y, But Not the How

Tesla Motors (TSLA US) unveiled Model Y on, perhaps not coincidentally, March 14th which also is Pi Day. Pi is the fundamental ratio which demonstrates that all circles are related–as Model Y is overwhelmingly related with the seminal Model 3 which contributes 75-80% of the newcomer’s platform and technology.

Which means Model Y may be originating with Model 3’s many inherent problems, as I discussed in Tesla’s Plan B 2.0; Y Not, just as Tesla also is juggling the ramp-up of the newly launched $35,000-base model of Model 3 along with sales expansion into Europe and China as well as building a new plant on a shoestring in Shanghai. All this just as the company also has lurched into a radical new online-only sales model with apparently little if any considered preparation (see Tesla’s New Plan: Buy Before You Try).

No wonder Tesla’s Vice President of Engineering Michael Schwekutsch just quit, an ominous signal.

Another is that Model Y won’t be available until late 2020–at best–which is much later than expected. It’s still not clear when or where Model Y will be in full production or, even more critical, when Tesla will make even a penny of profit on it. Model 3 only recently became marginally profitable, excluding the likely money-losing $35k version, and sales of more profitable but aging Models S and X are in accelerating decline.

And, as I observed last week, Tesla’s track record of long delays in delivering new models coupled with Model 3’s alarming quality and reliability may seriously diminish the hoped-for early bird reservation cash which the company sorely needs to ease its liquidity crunch. At the same time, the pending arrival of Model Y over the next year or so is likely to further dampen already waning demand for Model 3.

In any case, it’s too late for Tesla to preserve profitability in the calamitous first quarter, if not for the full year.

Continue reading for Bond Angle analysis.

4. 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.

5. 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

In this briefing:

1. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?
2. Tesla  – Now We Know The Y, But Not the How
3. China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes
4. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
5. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending

1. Bits and Bytes : Facebook Feels the WeChat Burn + Why Does Lyft Want to List ?

Facebook Inc A (FB US) : Mark Zuckerberg sees the light or is facing the WeChat burn? It seems like the whole tilt towards ensuring a more safe, secure environment lies in its play to emulate WeChat…eventually. But first, it needs to address specific issues of data protection, security and privacy that plague the company and possibly think around altering its current revenues via the advertisement model.

The company certainly seems to be moving towards making a token/coin and is even hiring blockchain specialists. Could it look to make a Stablecoin? Work on a M-Pesa model ? Target remittances in countries like India? It seems a long road and arduous road ahead- but it has been dropping directional hints along the way.

Lyft Inc (0812823D US) : Why does Lyft Inc (0812823D US) want to list exactly aside locking in money before the number one player swamps the market ? Could it be regulatory changes on the anvil ? And would those be food for thought for Asia plays – Grabtaxi Holdings Pte (0967655D SP)DiDi Chuxing (1284375D CH)  and Olacabs ?

2. Tesla  – Now We Know The Y, But Not the How

Tesla Motors (TSLA US) unveiled Model Y on, perhaps not coincidentally, March 14th which also is Pi Day. Pi is the fundamental ratio which demonstrates that all circles are related–as Model Y is overwhelmingly related with the seminal Model 3 which contributes 75-80% of the newcomer’s platform and technology.

Which means Model Y may be originating with Model 3’s many inherent problems, as I discussed in Tesla’s Plan B 2.0; Y Not, just as Tesla also is juggling the ramp-up of the newly launched $35,000-base model of Model 3 along with sales expansion into Europe and China as well as building a new plant on a shoestring in Shanghai. All this just as the company also has lurched into a radical new online-only sales model with apparently little if any considered preparation (see Tesla’s New Plan: Buy Before You Try).

No wonder Tesla’s Vice President of Engineering Michael Schwekutsch just quit, an ominous signal.

Another is that Model Y won’t be available until late 2020–at best–which is much later than expected. It’s still not clear when or where Model Y will be in full production or, even more critical, when Tesla will make even a penny of profit on it. Model 3 only recently became marginally profitable, excluding the likely money-losing $35k version, and sales of more profitable but aging Models S and X are in accelerating decline.

And, as I observed last week, Tesla’s track record of long delays in delivering new models coupled with Model 3’s alarming quality and reliability may seriously diminish the hoped-for early bird reservation cash which the company sorely needs to ease its liquidity crunch. At the same time, the pending arrival of Model Y over the next year or so is likely to further dampen already waning demand for Model 3.

In any case, it’s too late for Tesla to preserve profitability in the calamitous first quarter, if not for the full year.

Continue reading for Bond Angle analysis.

3. 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.

4. 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

5. 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.

In this briefing:

1. Tesla  – Now We Know The Y, But Not the How
2. China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes
3. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
4. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
5. NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment

1. Tesla  – Now We Know The Y, But Not the How

Tesla Motors (TSLA US) unveiled Model Y on, perhaps not coincidentally, March 14th which also is Pi Day. Pi is the fundamental ratio which demonstrates that all circles are related–as Model Y is overwhelmingly related with the seminal Model 3 which contributes 75-80% of the newcomer’s platform and technology.

Which means Model Y may be originating with Model 3’s many inherent problems, as I discussed in Tesla’s Plan B 2.0; Y Not, just as Tesla also is juggling the ramp-up of the newly launched $35,000-base model of Model 3 along with sales expansion into Europe and China as well as building a new plant on a shoestring in Shanghai. All this just as the company also has lurched into a radical new online-only sales model with apparently little if any considered preparation (see Tesla’s New Plan: Buy Before You Try).

No wonder Tesla’s Vice President of Engineering Michael Schwekutsch just quit, an ominous signal.

Another is that Model Y won’t be available until late 2020–at best–which is much later than expected. It’s still not clear when or where Model Y will be in full production or, even more critical, when Tesla will make even a penny of profit on it. Model 3 only recently became marginally profitable, excluding the likely money-losing $35k version, and sales of more profitable but aging Models S and X are in accelerating decline.

And, as I observed last week, Tesla’s track record of long delays in delivering new models coupled with Model 3’s alarming quality and reliability may seriously diminish the hoped-for early bird reservation cash which the company sorely needs to ease its liquidity crunch. At the same time, the pending arrival of Model Y over the next year or so is likely to further dampen already waning demand for Model 3.

In any case, it’s too late for Tesla to preserve profitability in the calamitous first quarter, if not for the full year.

Continue reading for Bond Angle analysis.

2. 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.

3. 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

4. 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.

5. 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

In this briefing:

1. China Housing: Price Growth Slowing Down, With YTD Y/Y Decline In Volumes
2. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
3. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
4. NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
5. 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

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.

In this briefing:

1. Upstream Oil & Gas M&A Review: Surge of Takeovers and Mergers in 2018 – What to Expect in 2019
2. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
3. NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
4. A Few Thoughts on Weak February China Auto Sales – Lunar Holidays Don’t Explain It in SAAR Terms
5. China Economics:  China’s Strategy on Trade War Has Worked

1. 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

2. 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.

3. 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

4. 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.

5. China Economics:  China’s Strategy on Trade War Has Worked

First, during the past couple of weeks, the most important event regarding the Chinese economy is the China US trade talk.  It is reported that both sides have made a preliminary agreement on trade war truce. It is an extraordinary development.   At the beginning of this China US trade war, most analysts had underestimated the seriousness of this trade conflict. Then after a series of escalations, analysts tend to overestimate this conflict by exploring the possibility of a full-scale conflict between China and US including national security, military and economic competition etc. we agree that China and US are in direct competition in almost every field. The issue is President Trump. He has to deal with the internal issues including the Muller investigation and the Democrats. So far, he has failed to make essential progress in dealing with internal opponents. He also just failed another Kim Trump summit. In our opinion, he is keen to make a deal with China. He is in a much weaker position than President Xi. Although at the beginning President Xi was under some criticism, currently, his authority is with no significant challenge. President Xi has also pretended to be humble when dealing with Trump. In our opinion, China’s strategy, such as buying time by deliberate delays or deceptions, has worked. 

In this briefing:

1. NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
2. A Few Thoughts on Weak February China Auto Sales – Lunar Holidays Don’t Explain It in SAAR Terms
3. China Economics:  China’s Strategy on Trade War Has Worked
4. Best World (BEST SP): BT Article, Franchise and KOL
5. SHIBOR and Rates

1. 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

2. 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.

3. China Economics:  China’s Strategy on Trade War Has Worked

First, during the past couple of weeks, the most important event regarding the Chinese economy is the China US trade talk.  It is reported that both sides have made a preliminary agreement on trade war truce. It is an extraordinary development.   At the beginning of this China US trade war, most analysts had underestimated the seriousness of this trade conflict. Then after a series of escalations, analysts tend to overestimate this conflict by exploring the possibility of a full-scale conflict between China and US including national security, military and economic competition etc. we agree that China and US are in direct competition in almost every field. The issue is President Trump. He has to deal with the internal issues including the Muller investigation and the Democrats. So far, he has failed to make essential progress in dealing with internal opponents. He also just failed another Kim Trump summit. In our opinion, he is keen to make a deal with China. He is in a much weaker position than President Xi. Although at the beginning President Xi was under some criticism, currently, his authority is with no significant challenge. President Xi has also pretended to be humble when dealing with Trump. In our opinion, China’s strategy, such as buying time by deliberate delays or deceptions, has worked. 

4. Best World (BEST SP): BT Article, Franchise and KOL

Best World International (BEST SP) share price has been hammered due to the recent article in Business Times, although the company has addressed them one by one. The annual meeting that recently took place in their office in Singapore shed some light on the seemingly “new but not so new” franchise business model in China. The company also has started to engage Key Opinion Leaders (KOL) aka social media influencers as part of their social selling campaign. 

5. SHIBOR and Rates

There are two important points worth noting. First, China remains an overwhelmingly short term capital market from the money markets to structured deposits to bond duration which remain heavily tilted towards durations under five years. Second, what we are seeing in the money markets accords with the PBOC unofficial policy of trying to keep the headline rate unchanged but nudge down the unofficial rates.

In this briefing:

1. A Few Thoughts on Weak February China Auto Sales – Lunar Holidays Don’t Explain It in SAAR Terms
2. China Economics:  China’s Strategy on Trade War Has Worked
3. Best World (BEST SP): BT Article, Franchise and KOL
4. SHIBOR and Rates
5. StubWorld: Wharf Under Pressure As Cooling Measures Bite

1. 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.

2. China Economics:  China’s Strategy on Trade War Has Worked

First, during the past couple of weeks, the most important event regarding the Chinese economy is the China US trade talk.  It is reported that both sides have made a preliminary agreement on trade war truce. It is an extraordinary development.   At the beginning of this China US trade war, most analysts had underestimated the seriousness of this trade conflict. Then after a series of escalations, analysts tend to overestimate this conflict by exploring the possibility of a full-scale conflict between China and US including national security, military and economic competition etc. we agree that China and US are in direct competition in almost every field. The issue is President Trump. He has to deal with the internal issues including the Muller investigation and the Democrats. So far, he has failed to make essential progress in dealing with internal opponents. He also just failed another Kim Trump summit. In our opinion, he is keen to make a deal with China. He is in a much weaker position than President Xi. Although at the beginning President Xi was under some criticism, currently, his authority is with no significant challenge. President Xi has also pretended to be humble when dealing with Trump. In our opinion, China’s strategy, such as buying time by deliberate delays or deceptions, has worked. 

3. Best World (BEST SP): BT Article, Franchise and KOL

Best World International (BEST SP) share price has been hammered due to the recent article in Business Times, although the company has addressed them one by one. The annual meeting that recently took place in their office in Singapore shed some light on the seemingly “new but not so new” franchise business model in China. The company also has started to engage Key Opinion Leaders (KOL) aka social media influencers as part of their social selling campaign. 

4. SHIBOR and Rates

There are two important points worth noting. First, China remains an overwhelmingly short term capital market from the money markets to structured deposits to bond duration which remain heavily tilted towards durations under five years. Second, what we are seeing in the money markets accords with the PBOC unofficial policy of trying to keep the headline rate unchanged but nudge down the unofficial rates.

5. StubWorld: Wharf Under Pressure As Cooling Measures Bite

This week in StubWorld …

• Wheelock & (20 HK) is coming up “expensive”, but it’s Wharf Holdings (4 HK) which is under-performing after PRC property sales targets are lowered amid Beijing’s cooling measures.

Preceding my comments on Wheelock and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.