Market Report Summary - 28 January 2015
Core Content Overview
This document provides an analysis of the real estate and TMT (Technology, Media, and Telecommunications) sectors as of 28 January 2015. It includes a detailed report on Redco Properties Group Limited, an update on the TMT O2O sector comparing Dianping and Meituan, and summaries of key developments in the TMT sector. Additionally, it presents the performance of major equity indices, commodity prices, and other financial indicators.
Redco Properties Group Limited (1622.HK)
Key Points
- Company Overview: Redco is a developer focused on residential property in mid-tier cities and selected tier 1&2 cities.
- Competitive Strength: The company benefits from focusing on cities with strong economic potential, which allows it to avoid fierce competition in high-tier cities while enjoying reasonable land costs and moderate competition.
- Landbanking Strategy: Redco has a prudent landbanking approach, acquiring most of its land when the market was low. It also leverages cultural concepts and M&A to secure land at low cost.
- Cash Position: Maintains a healthy cash position with a net gearing of 48.7% as of 31 June 2014 and an effective interest rate of 7.67%. It issued USD125 million in senior notes, expected to improve liquidity and debt leverage.
- Valuation: The company is currently trading at 10.3x 2015E PE and 59% discount to its 2015E NAV. The target price is set at HK$3.71, representing 10.0x FY15E PE and 1.7x FY15E P/BV.
- Risks: Concerns exist regarding the sustainability of its low land cost advantage due to the current hot land market. Expansion into Tier1&2 cities may bring challenges such as higher land prices and fiercer competition.
- Coverage Recommendation: The company is initiated with a Hold rating and a target price of HK$3.71.
TMT O2O Sector Update: Dianping vs Meituan
Dianping
- Group Buying: GMV exceeded RMB2bn in November 2014, with peak daily GMV over RMB100mn. GMV increased 2 times YoY by mid-December 2014, and merchant partners increased 5 times YoY.
- New Business Expansion: Hotel and travel business revenue increased by 360%, with comments up 570% and hotel reservations up 280%. Film business revenue increased by 300%, covering 1400 cinemas in 230 cities.
- Mobile Traffic: Mobile traffic and revenue accounted for 70% and 50% of total, respectively.
- Valuation: Valued at around US$3.5bn after Tencent's investment, up from US$2bn in Feb 2014.
- Employee Growth: Employees increased to ~700 in 2014.
Meituan
- Market Share: Holds over 60% of the total O2O market share in China, with annual GMV exceeding RMB46bn, indicating 180% YoY growth.
- Coverage Expansion: Over 800,000 merchant partners and coverage in 1000 cities, showing 300% and 400% YoY growth, respectively.
- Mobile Contribution: Mobile platform GMV contributes over 90% to total GMV, with over 200 million activated users.
- Valuation: Recently valued at US$7.0bn after well-executed expansion and investment from Alibaba.
- Competition Landscape: Dominates the market with Meituan, Dianping, and Baidu's Nuomi accounting for 84%+ of the total market.
TMT Sector Highlights
- Ymatou: Secured US$100 million in Series B funding, the largest investment in China's cross-border shopping sector.
- Jack Ma's Investment: Yunfeng Capital, co-founded by Jack Ma, invested RMB500 million in Guangzhou Baiyunshan Pharmaceutical.
- WeChat Ads: Tencent launched WeChat advertising, with initial ads from BMW and Coca-Cola appearing in users' timelines.
- Alipay Red Packets: Alipay introduced electronic red packets to strengthen its position in the mobile payment market.
- Cambodia-China Telecom Cooperation: Both countries signed a MoU to cooperate in telecommunications and ICT, including exchange of information and expertise.
Market Indices and Financial Indicators
Hong Kong Equities
| Index |
Price 27 Jan |
Abs Chg |
% Chg |
| Hang Seng Index |
24,807 |
(103) |
(0.4) |
| H-share Index |
12,030 |
(198) |
(1.6) |
| Turnover (HK$bn) |
94.0 |
10 |
12.2 |
| - % from HSI |
30.0 |
(2) |
|
| - % CBBC, warrants |
29.4 |
1 |
|
China Equities
| Index |
Price 27 Jan |
Abs Chg |
% Chg |
| CSI 300 Index |
3,575 |
(33) |
(0.9) |
| Sh Composite Index |
11,552 |
(135) |
(1.2) |
| Sz Composite Index |
1,550 |
2 |
0.1 |
Asian Equities
| Index |
Price 27 Jan |
Abs Chg |
% Chg |
| Nikkei 225 |
17,768 |
300 |
1.7 |
| Korea KOSPI |
1,952 |
17 |
0.9 |
| Taiwan TWSE |
9,522 |
44 |
0.5 |
| India Sensex 30 |
29,571 |
292 |
1.0 |
US/European Equities
| Index |
Price 27 Jan |
Abs Chg |
% Chg |
| DJIA |
17,387 |
(291) |
(1.6) |
| S&P 500 |
2,030 |
(28) |
(1.3) |
| NASDAQ |
4,681 |
(90) |
(1.9) |
| UK FTSE 100 |
6,812 |
(41) |
(0.6) |
| Germany DAX |
10,629 |
(170) |
(1.6) |
| France CAC40 |
4,624 |
(51) |
(1.1) |
Other Indicators
| Indicator |
Price 27 Jan |
Abs Chg |
% Chg |
| WTI oil $/bl |
46.2 |
1.1 |
2.4 |
| Gold $/troy oz |
1,290.5 |
9.4 |
0.7 |
| Copper fut. $/metric ton |
5,580.0 |
0.0 |
0.0 |
| Aluminum fut. $/metric ton |
1,879.0 |
0.0 |
0.0 |
| CRB fut. |
217.9 |
1.9 |
0.9 |
| Baltic Dry Index |
688.0 |
(15.0) |
(2.1) |
| US Treasury Yield 3m % |
0.02 |
0.01 |
|
| US Treasury Yield 10y % |
1.82 |
(0.001) |
|
| HIBOR 3m % |
0.39 |
(0.001) |
|
| USD LIBOR 3m % |
0.26 |
0.000 |
|
Peer Comparison
| Company |
MktCap (USD, mn) |
EV (USD) |
1m % Chg |
3m % Chg |
6m % Chg |
YTD % Chg |
52Wk High |
52Wk Low |
Adjusted EPS (USD) |
13A PE |
14E PE |
15E PE |
13A EV/Sales |
14E EV/Sales |
15E EV/Sales |
13A GM % |
14E GM % |
15E GM % |
| Baidu |
80,478 |
76,283 |
229.5 |
-2.31 |
4.34 |
1.30 |
252.0 |
140.7 |
0.65 |
91.08 |
45.99 |
40.66 |
16.29 |
16.37 |
11.93 |
76.2 |
82.4 |
81.0 |
| Sohu |
2,203 |
1,995 |
57.2 |
9.24 |
33.00 |
-0.30 |
87.7 |
42.0 |
1.84 |
65.7 |
59.1 |
56.7 |
5.36 |
5.61 |
4.72 |
56.8 |
68.9 |
68.2 |
| Sina |
2,470 |
1,218 |
37.1 |
-3.99 |
-5.14 |
-25.26 |
78.5 |
34.9 |
0.79 |
59.2 |
61.8 |
63.6 |
7.49 |
12.14 |
10.50 |
56.8 |
68.9 |
68.2 |
| Bitauto |
2,740 |
2,585 |
60.1 |
-18.28 |
-22.76 |
6.03 |
98.3 |
27.1 |
0.95 |
76.7 |
80.4 |
81.4 |
18.21 |
25.84 |
29.97 |
56.8 |
68.9 |
68.2 |
| Autohome |
3,881 |
3,751 |
35.4 |
-5.58 |
-27.84 |
2.46 |
57.9 |
28.5 |
0.13 |
84.05 |
34.69 |
25.94 |
18.20 |
11.57 |
8.18 |
56.8 |
68.9 |
68.2 |
| Qihoo 360 |
7,674 |
7,688 |
60.9 |
0.33 |
-6.98 |
-38.54 |
124.4 |
17.1 |
5.04 |
36.8 |
41.1 |
44.1 |
2.87 |
1.53 |
1.70 |
56.8 |
68.9 |
68.2 |
| Youku |
3,597 |
2,263 |
17.3 |
-1.37 |
-6.19 |
-12.29 |
37.7 |
13.7 |
-3.41 |
68.2 |
71.5 |
73.8 |
2.05 |
1.42 |
1.09 |
56.8 |
68.9 |
68.2 |
| JD.com |
34,561 |
29,867 |
25.0 |
1.83 |
3.65 |
-13.85 |
33.1 |
19.0 |
-0.10 |
73.0 |
71.7 |
70.2 |
5.36 |
5.61 |
4.72 |
56.8 |
68.9 |
68.2 |
| Jumei |
1,951 |
1,358 |
13.6 |
-9.50 |
-37.73 |
-56.87 |
39.5 |
12.1 |
0.56 |
41.3 |
42.6 |
42.0 |
2.05 |
1.42 |
1.09 |
56.8 |
68.9 |
68.2 |
Summary
- Redco Properties Group Limited is a mid-tier city developer with a strategic focus on economic potential and cost-effective land acquisition. It is rated Hold with a target price of HK$3.71, reflecting its valuation based on FY15E PE and P/BV.
- TMT O2O Sector is dominated by Meituan and Dianping, with Meituan showing aggressive expansion and strong mobile performance. Dianping is focusing on new business areas and platform valuation.
- Market Indices show mixed performance across regions, with notable declines in the US and European markets, but modest gains in Asian markets.
- Commodity Prices and financial indicators suggest a stable market environment with slight increases in oil and gold prices.
- Peer Comparison highlights the valuation and performance of various TMT companies, with Meituan and JD.com showing stronger growth and market presence.
- Key Developments in the TMT sector include cross-border e-commerce funding, mobile payment advancements, and international telecom cooperation.
