Tag Archives: Makers
HANGZHOU, China (Reuters) – Humming away in an industrial estate in the eastern Chinese resort city of Hangzhou, electric vehicle designer Automagic is one of hundreds of companies looking to ride the country’s wave of investment in clean transportation.
The company wants to find a niche in a crowded sector that already includes renewable equipment manufacturers, battery makers and property developers like the Evergrande Group, as well as established auto giants.
But not all of these electric vehicle hopefuls will make it to the finish line.
“This (large number of firms) is inevitable, because whenever there is an emerging technology or emerging industry, there must be a hundred schools of thought and a hundred flowers blooming,” said Zhou Xuan, Automagic’s general manager, referring to Chinese leader Mao Zedong’s ill-fated 1956 “Hundred Flowers” campaign aimed at encouraging new ideas.
China is using preferential policies and brute manufacturing power to position itself at the forefront of global efforts to electrify transportation. By the end of 2017, ownership of new energy vehicles (NEV) – those powered by fuels other than petrol – reached 1.8 million in China, over half the world’s total.
With market expectations high, Chinese EV maker NIO, a rival to Tesla, launched a high-profile IPO in New York last month.
In July, the industry ministry published a list of 428 recommended NEV designs built by 118 enterprises throughout the country. It included not only established carmakers like FAW Group and Geely Automobiles, but also small, new entrants with names like Greenwheel, Wuhu Bodge Automobiles and Jiangsu Friendly Cars.
But regulators are already concerned about overcapacity and “blind development.” As subsidies are cut, smaller start-ups need to develop a competitive edge.
“After a period of intense competition, the rocks will appear, and the weak will be consolidated or eliminated,” Zhou said.
Overcapacity has been a persistent concern for many Chinese industries, with thousands of firms, backed by growth-hungry local governments and supported by risky loans, expanding quickly.
Over the years, China has been forced to take action against price-sapping supply gluts in steel, coal and solar panels, among others.
Electric vehicles could be next, as local governments feel pressure to create champions while following state instructions to “upgrade” their heavy industrial economies.
Some executives say the market is already distorted by subsidies granted to inefficient and poorly performing firms.
“Right now, the rapid growth of NEVs is not a market choice but government-guided behavior, with growth stimulated by subsidies,” said Li Lei, deputy director of the new energy department of Jiangxi Dacheng Autos, a new joint venture carmaker in eastern China’s Jiangxi province.
Though sales soared 88 percent in the first eight months of 2018, hitting 601,000 units, the National Development and Reform Commission (NDRC) has promised to tackle irrational growth in the sector.
In draft rules released this year, it said it would “plan and arrange the new energy vehicle industry scientifically,” and block new production capacity in regions where the utilization rate was less than 80 percent.
But China has often relied on “strategic” supply gluts to boost competitiveness. Excess production in solar power forced producers to reduce costs and compete, subsidy-free, with conventional energy sources.
Liu Xiaolu, sales manager with ICONIQ Motors, a Tianjin-based luxury electric vehicle maker, said the large number of companies could be a “necessary stage” of development for the sector.
“You cannot say that 20 enterprises will definitely be able to develop the entire industry by themselves, and it probably needs everyone to come together, and then gradually get eliminated afterwards,” he said.
Established automakers told Reuters they’d already had plenty of time to prepare for the shift towards electric transportation.
Xu Hongfei, general manager with Zotye Automobile, a mid-sized Chinese automaker, said it had been preparing for China’s “exit schedule” from traditional vehicles for more than a decade and had developed core technologies such as batteries.
With a staff of 20, Automagic was founded in 2015 by former engineers from IBM and Geely. It is talking with partners to bring its models to the market.
The company is focusing on small, short-distance family vehicles rather than large-scale cars built by the likes of BYD. It is also seeking better ways to produce, recharge and recycle batteries.
“The most important point is that new energy vehicles need to be energy efficient, with low energy consumption, so we focus on cutting weight and making cars smaller so battery use can be reduced,” said Zhong Jin, Automagic’s co-founder and chief executive.
GCL, one of China’s biggest renewable developers, plans to turn its “new energy town” at Jurong in Jiangsu province into a major manufacturing center with its expertise in batteries and recycling expertise, and even create a battery rental system.
Although all the companies are trying to get an edge through innovation, Li of Jiangxi Dacheng said success could simply come down to market positioning.
“Our company doesn’t have any very big advantages or very big disadvantages and competition is dependent first on branding, second on financing, and third on sales channels,” he said.
Additional reporting by Shanghai newsroom; Editing by Gerry Doyle
HONG KONG (Reuters) – Two Chinese bitcoin mining equipment makers plan to raise up to $ 1 billion each from Hong Kong listings this year, riding on strong global interest in cryptocurrencies, IFR reported on Tuesday, citing people familiar with the plans.
Canaan Creative filed a listing application to the Stock Exchange of Hong Kong on Monday, IFR, a Thomson Reuters publication, reported.
Zhejiang Ebang Communication has also started working with advisers on a proposed Hong Kong float of up to $ 1 billon, reported IFR.
Ebang listed on China’s National Equities Exchange and Quotations, also known as the New Third Board, in 2015 and was
delisted from the over-the-counter market in March after announcing in January that it would seek a Hong Kong listing.
Chinese bitcoin mining equipment makers are hungry for capital to fund their growth as the heightened interest in cryptocurrencies has led to a surge in demand for their machines.
Canaan, which sells “Avalon” mining machines with customised super-fast ASIC chips, made revenue of more than 1 billion yuan in 2017. Although cryptocurrencies can be mined using regular computer equipment, specialised processing devices dedicated to mining are more effective and can generate more income.
The company’s co-chairman Jianping Kong told Reuters in April that he expected China’s push to promote the domestic chip industry to help drive growth for the company.
Credit Suisse, CMB International, Deutsche Bank and Morgan Stanley are joint sponsors for Canaan’s float, according to IFR.
Canaan Creative declined to comment. Ebang could not be immediately reached for comment. All the banks didn’t immediately respond to a request for comment.
Canaan’s IPO valuation has yet to be set as there is no listed comparable and the prices of cryptocurrencies have
fluctuated a lot, reported IFR. It was valued at $ 500 million in mid-2017, IFR said, attributing it to one of the people.
Reporting by Fiona Lau at IFR; Additional reporting by Sijia Jiang; Writing by Julie Zhu; Editing by Muralikumar Anantharaman
By Valuentum analysts
Image Source: Hasbro
There’s nothing like the announcement of a customer’s possible liquidation to send shares of suppliers tumbling. That’s what happened when Toys ‘R’ Us announced that it may have to cease operations as nobody appears to be coming to the rescue. Hasbro (HAS), Mattel (MAT), and JAKKS Pacific (JAKK) may feel some near-term operational discomfort, but we’re not overreacting.
If a rescue deal doesn’t happen for Toys ‘R’ Us, online verticals and big box retailers such as Walmart (WMT) and Target (TGT) may easily fill the void. Target CEO Brian Cornell noted, in particular, that his company is “playing to win in toys.” Though we’re viewing the Toys ‘R’ Us announcement as more ‘headline noise’ than anything that may impact the toy makers over the long haul, readers may expect forward near-term guidance to now have a more cautious bent, and that may disappoint some investors.
Rumors of a deal between Hasbro and Mattel haven’t let up from what we can tell, and we think the Toys ‘R’ Us possible liquidation could grease the wheels for further talks, as anti-trust interference may not be that fierce given end market troubles and concentrated online distributor power through the likes of Amazon (AMZN) and eBay (EBAY). We continue to like Hasbro the most out of the toy makers, but we caution management against the temptation to overpay for Mattel’s assets, as the Barbie franchise could very well be in terminal decline, given Disney’s (DIS) Frozen success. We also like that Hasbro continues to pull a variety of levers, the latest an agreement with Netflix (NFLX) to create toys and games from the Super Monsters animated kids series. This follows the Hasbro-Netflix’s joint effort to bring a collection of games to Stranger Things fans.
We wrote about Hasbro’s fourth-quarter report, released February 7, and at the time, we highlighted that management had pointed “to slower consumer demand for both the company and its industry in November and December,” but we also said that we think management is confident that its innovative lines and digital initiatives will deliver in 2018. What we’re watching closely at Hasbro is the long-term trajectory of its ‘Entertainment and Licensing’ business line, where on a full-year basis, operating profit in the segment nearly doubled, to $ 96.4 million on just ~8% revenue expansion (the division posted a near-34% operating margin). This segment may hold the keys to Hasbro’s future, but even so, Hasbro was able to still drive revenues nearly $ 1 billion higher during the past 5 years. Physical toy sales are under pressure, but by no means, dead.
Hasbro’s equity has advanced considerably during the past 5 years, and its 10%+ dividend increase, to a quarterly payout of $ 0.63, on February 7, means shares now have a forward yield of 2.8%. We’re not overreacting to the Toys ‘R’ Us announcement by any stretch, with our discounted cash-flow-derived fair value estimate of Hasbro hovering in the high-$ 80s at the time of this writing. For more information on our thoughts on Hasbro, in particular, and our assumptions behind our fair value estimate, please download Hasbro’s 16-page valuation report from Valuentum here (pdf).
Image: The first page of Valuentum’s 16-page report.
This article or report and any links within are for information purposes only and should not be considered a solicitation to buy or sell any security. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this article and accepts no liability for how readers may choose to utilize the content. Assumptions, opinions, and estimates are based on our judgment as of the date of the article and are subject to change without notice.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Hasbro is included in Valuentum’s simulated Dividend Growth Newsletter portfolio.
Editor’s Note: This article covers one or more stocks trading at less than $ 1 per share and/or with less than a $ 100 million market cap. Please be aware of the risks associated with these stocks.
VR is coming, and Oculus has partnered up with PC makers like ASUS, Dell, and Alienware to make an Oculus-ready lineup of gaming desktops for under 1K that meet the needed specifications to run an Oculus smoothly and worry-free. These PCs will also come with Oculus bundle options. Get ready, people. It’s happening.