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58.com & Anjuke Acquisition Summary

Core Content

58.com (WUBA.US) announced the acquisition of Anjuke for a total consideration of US$267 million, with US$160 million paid in cash and the rest in shares. This acquisition is part of 58.com's strategy to expand into the primary real estate business and integrate Anjuke's platform with its existing housing content traffic and resources. Anjuke will continue to operate under its brand, and the deal is expected to enhance 58.com's market position through cross-selling and brand synergy.

Key Points

• Acquisition Details:

  • 58.com acquired Anjuke for US$267 million.
  • Anjuke's pre-IPO valuation was US$1 billion, but the acquisition price was significantly lower, indicating a strategic move to expand.
  • The deal is expected to lead to a 3% dilution for 58.com.

• Strategic Expansion:

  • 58.com has diversified its business beyond traditional yellow pages, rental real estate, and job services.
  • It has extended into used cars and O2O services (58 Daojia).
  • The acquisition of Anjuke marks its entry into primary real estate services and further strengthens its secondary real estate platform.

• Market Position and Competition:

  • The company is facing intense competition from Ganji, which raised over US$200 million, and Baixing, which also received additional financing.
  • The price war for market share is expected to continue among the big three players in the classified ads market, including competition from Baidu, Alibaba, Soufun, and Leju.

• Financial Performance:

  • 58.com's 4Q14 revenue guidance was between US$74.5 million and US$77.0 million, representing 65% to 70% YoY growth.
  • According to Bloomberg consensus, the stock is currently trading at 197x 2014F PE.
  • The company is expected to have a 60%+ topline growth in 2015, with a consensus estimate of a US$22 million net loss due to large-scale promotions and market expansion.

Key Financial Data

Shareholding Structure

Outlook and Valuation

• The company is expected to continue aggressive investment in housing services, which may further impact its bottom-line.
• Despite the expected net loss in 2015, the company is anticipated to maintain strong growth in revenue.
• The acquisition is seen as a strategic move to strengthen its market position in the competitive Chinese real estate market.

Market Trends and Performance

• The TMT sector saw mixed performance with some companies showing positive growth while others experienced declines.
• In the stock market, the Hang Seng Index and H-share Index showed minor gains, while the CSI 300 Index had a modest increase.
• Asian and US/European markets also showed varied performance, with some indices rising and others falling.

Other Indicators

• Oil and Metals: WTI oil slightly declined, while gold and copper futures showed minor fluctuations.
• Interest Rates: US Treasury yields and HIBOR showed minimal changes.
• Indices: The Baltic Dry Index increased slightly, indicating some improvement in shipping markets.

Summary

The acquisition of Anjuke by 58.com is a strategic move to expand into the primary real estate sector and integrate with its existing secondary real estate platform. This acquisition, at a lower valuation than Anjuke's pre-IPO value, is expected to enhance 58.com's market position and brand recognition. The company continues to burn cash for O2O and auto business expansion, which may affect its profitability. Despite the expected net loss in 2015, the company is projected to see significant revenue growth, driven by market expansion and promotional activities. The competitive landscape remains intense, with other major players investing heavily in their respective markets.