18. October 2021 | 12:02 CET
China Evergrande, AdTiger, Geely - Great opportunities in China
China cannot get out of the negative headlines. After the government accelerates the regulation of domestic technology groups, the Middle Kingdom is facing the next problem. The impending collapse of Chinese real estate giant Evergrande has been preoccupying the markets for weeks. However, due to the strong correction in recent months, there are attractive entry opportunities, especially in the technology sector. Charlie Munger, for example, long-time business partner of investment legend Warren Buffett, massively increased his stake in online giant Alibaba in the last quarter, according to a report in the Daily Journal.
time to read:
ISIN: CHINA EVERGRANDE GROUP | KYG2119W1069 , ADTIGER CORP.LTD. | KYG009701064 , GEELY AUTO. HLDGS HD-_02 | KYG3777B1032
It is still unclear how much the Evergrande crisis will spread to other industries. The fact is, the group is sitting on a debt mountain of more than USD 300 billion, and several deadlines for interest payments due to bondholders have already passed. Given the size of the liabilities, there is widespread concern that a collapse of Evergrande could trigger a conflagration in the Chinese real estate sector. China's central bank has now spoken out at a press conference and described the risks to the financial system as manageable. It is also unlikely that the Evergrande crisis will spread to other sectors.
Meanwhile, the management of the ailing real estate giant is trying to save what can still be saved by selling assets. Meanwhile, a sale of the Hong Kong headquarters for around USD 1.7 billion has fallen through. According to well-informed sources, Yuexiu Property, a real estate developer owned by the state, has pulled out of the talks given Evergrande's difficult financial situation. The struggling group could face further trouble from Hong Kong's accounting regulator. The Financial Reporting Council (FRC) is reviewing the 2020 financial statements and the 2021 half-year financial statements, and PwC's auditors are also scrutinizing the 2020 financial statements. The focus will be on the appropriateness of the consolidated financial statements as well as the audit report.
Regulations promote smaller companies
During the year, regulatory tightening has been applied specifically to Chinese tech giants such as Alibaba, Baidu, and Tencent. The Chinese government's goal is likely to have been, among other things, to limit the power position of monopolists and oligopolists and to stop such practices as forcing merchants to sign exclusive contracts, as well as to restrict predatory marketing.
In turn, this promotes competition and creates an environment in which smaller companies can grow. A good example of this is the fastest growing digital marketing company in 2020, AdTiger. The already profitable Company received this award at the 20th IAI International Advertising Awards. AdTiger is one of the leading digital marketing companies in the Asian region. The growth rates in this segment are enormous, with annual increases of over 25%. AdTiger's clientele is a "who's who" of Chinese Fortune 50 companies. Sina, Futu, Netease and Baidu are just a few examples. The Company offers digital marketing solutions for its clientele and helps them with marketing and sales. The aim is, among other things, to build brands and expand the customer base.
With Big Data and AI
In contrast, AdTiger, using Big Data and algorithms as the core of its AdTensor platform, uses the leading Internet media platforms to gain access to globally active Internet users. In doing so, AdTiger can draw on several years of successful partnerships with global players. AdTiger is Google's primary advertising agency in China and has been one of Facebook's export partners for 8 years. In addition, the China-based holding Company cooperates closely with TikTok, Bigo and WeChat Video and was named Snapchat's "Lens Creative Partner."
Over the past year, AdTiger has had to make a geographic pivot toward the Chinese advertising market. Due to the swelling trade conflict with the US and the collapse of the Indian market as a result of the Corona pandemic, the focus was shifted to the Middle Kingdom. The upheaval resulted in a one-time drop in profits of about 40% in the first half of the year. Despite the one-time effect, however, AdTiger's future looks bright. The China-based holding Company wants to grow through strategic cooperations and acquisitions of various apps and further expansion into ASEAN countries such as Indonesia, Singapore and Vietnam. The Company's stock market value is EUR 48.28 million. In contrast to the beginning of the stock market year, investors are currently receiving a 50% discount on the share price.
Almost 20% fewer cars were sold in China in September. Due to the shortage of semiconductor components, sales declined for the fifth consecutive month, with a total of 2.07 million cars delivered. However, this figure includes vehicles with internal combustion engines. By contrast, sales of alternative drive systems - including electric vehicles, plug-in hybrids and fuel cell vehicles - rose sharply. 357,000 units represent a doubling compared with the previous month.
Daimler's partner Company, Geely, was also unable to escape this trend. A total of 103,936 units crossed the counter, representing a decline of 18% compared to the previous month. In the alternative drive segment, the Company recorded a whopping 26.6% month-on-month increase with 11,177 automobiles compared to 8201.
By breaking above the prominent resistance line at EUR 2.60, Geely could generate a buy signal.
How much does the crisis surrounding the stumbling Evergrande real estate group impact the economy? The activities of the Chinese regulatory authorities have also led to a significant correction in tech stocks in recent months. AdTiger was unable to escape this, but the business is growing strongly. Geely is also attractive at the current level.