Market Report Summary - 17 December 2014
Core Content Overview
This market report provides an overview of the TMT sector, highlights key developments, and includes financial and market data for ChinaSoft International (354.HK) and other major equity indices, commodities, and currencies.
Key Highlights in the TMT Sector
- Tuniu Corp received a US$148 million investment round led by Hony Capital and JD.com, with Ctrip.com and Tuniu's executives also participating.
- Xiaomi reported a net profit of RMB 347.5 million in 2013, despite generating RMB 26.58 billion in revenue.
- Baidu partnered with Nokia's HERE to power its mapping services outside of China, with the first market being Taiwan.
- Miyabaobei, a childcare e-commerce platform, secured USD 60 million in Series C funding to enhance its global supply chain and customer experience.
- Tencent, PPTV, and other companies faced scrutiny from Chinese authorities for promoting "vulgar content."
ChinaSoft International (354.HK)
Official Launch of JointForce Crowdsourcing Platform
- ChinaSoft officially launched its JointForce crowdsourcing platform, which has undergone 3 months of beta testing.
- The platform has already attracted 7,000 engineers, and the company aims to expand this to 80,000 by 2015.
- It plans to collaborate with 1000+ task-issuing partners through local distribution and word-of-mouth marketing.
- ChinaSoft will also establish a JF cloud fund to invest in mid and small-cap enterprises with high development potential.
Strategic Partnerships
- ChinaSoft has formed alliances with Alibaba, Huawei, China Mobile, and recently Tencent.
- The partnership with Tencent includes providing IT services for Tencent games, which is expected to contribute significantly to ChinaSoft's revenue in 2015 and beyond.
Business Strategy
- First Stage: Focus on increasing production efficiency and revenue by expanding to small businesses.
- Second Stage: Aim to add value to regional partners and develop JointForce as a new technology and information integrated service platform.
Valuation and Financial Metrics
Current Valuation
- ChinaSoft is currently trading at 14.4x 2015F PE, which is in line with the IT services sector average.
- The company's topline growth guidance for 2015 is 40%+, significantly higher than the market's estimate of 35% for 2014F and 25% for 2015F.
Gross Margins
- OSG (Outsourcing Services): 25%-35%
- PSG (Professional Services): 35%-45%
- ESG (Enterprise Services): 40%+
Revenue and Profit Trends
| Year |
Turnover (Rmb mn) |
Net Profit (Rmb mn) |
EPS (Rmb) |
Growth YoY (%) |
| FY 2010 |
1,601.2 |
-29.7 |
-0.04 |
69.8 |
| FY 2011 |
2,243.8 |
121.1 |
0.08 |
- |
| FY 2012 |
2,768.2 |
150.1 |
0.08 |
-2.4 |
| FY 2013 |
3,206.0 |
200.0 |
0.08 |
5.0 |
| FY 2014E |
4,338.1 |
205.1 |
0.10 |
22.6 |
| FY 2015E |
5,386.1 |
257.3 |
0.13 |
27.2 |
Cash Flow and Capital Expenditures
- Cash from Operations is expected to increase significantly in 2015 to Rmb 203.8 million.
- Capital Expenditures are projected to be Rmb -141.6 million in 2015, indicating a focus on maintaining current operations rather than expanding.
Stock Market Performance
Hong Kong Equities
| Index |
Price (16 Dec) |
Abschg |
%chg |
| Hang Seng Index |
22,671 |
-357 |
-1.6 |
| H-share Index |
11,137 |
-76 |
-0.7 |
China Equities
| Index |
Price (16 Dec) |
Abschg |
%chg |
| CSI 300 Index |
3,303 |
86 |
2.7 |
| Sh Composite Index |
10,669 |
164 |
1.6 |
| Sz Composite Index |
1,504 |
3 |
0.2 |
Asian Equities
| Index |
Price (16 Dec) |
Abschg |
%chg |
| Nikkei 225 |
16,755 |
-344 |
-2.0 |
| Korea KOSPI |
1,904 |
-16 |
-0.8 |
| Taiwan TWSE |
8,951 |
-35 |
-0.4 |
| India Sensex 30 |
26,781 |
-538 |
-2.0 |
US/European Equities
| Index |
Price (16 Dec) |
Abschg |
%chg |
| DJIA |
17,069 |
-112 |
-0.7 |
| S&P 500 |
1,973 |
-17 |
-0.8 |
| NASDAQ |
4,548 |
-57 |
-1.2 |
| UK FTSE 100 |
6,332 |
149 |
2.4 |
| Germany DAX |
9,564 |
230 |
2.5 |
| France CAC40 |
4,093 |
88 |
2.2 |
Key Financial Metrics for ChinaSoft
| Metric |
FY 2010 |
FY 2011 |
FY 2012 |
FY 2013 |
FY 2014E |
FY 2015E |
| Turnover (Rmb mn) |
1,601.2 |
2,243.8 |
2,768.2 |
3,206.0 |
4,338.1 |
5,386.1 |
| Gross Profit (Rmb mn) |
513.2 |
729.5 |
915.3 |
1,005.2 |
1,354.2 |
1,659.8 |
| EBITDA (Rmb mn) |
198.0 |
277.9 |
325.7 |
356.2 |
448.2 |
551.0 |
| Net Income (Rmb mn) |
-40.1 |
110.6 |
133.2 |
148.3 |
210.0 |
252.0 |
Balance Sheet Overview
| Item |
FY 2010 (Rmb mn) |
FY 2011 (Rmb mn) |
FY 2012 (Rmb mn) |
FY 2013 (Rmb mn) |
| Total Current Assets |
1,322.9 |
1,940.7 |
2,415.5 |
3,175.2 |
| Total Liabilities |
1,271.6 |
1,143.8 |
1,380.1 |
2,231.8 |
| Total Equity |
1,102.0 |
1,803.7 |
2,062.3 |
2,441.2 |
| Total Assets |
2,373.6 |
2,947.5 |
3,442.4 |
4,673.0 |
Conclusion
The report highlights ChinaSoft's strategic launch of JointForce, a cloud-based crowdsourcing platform, and its partnerships with major tech firms like Tencent, Alibaba, and Huawei. The company is expected to see strong revenue growth and improved gross margins in 2015. Meanwhile, the TMT sector saw significant investment activity, with Tuniu and Xiaomi gaining attention. The broader market data shows mixed performance across global indices, with some declines in Asian and US markets.
