This article is from WeChat official account: Alpha Workshop (ID:alpworks), author: du Chong, head picture from visual China.
In the past five years, Cheetah Mobile (NASDAQ: CMCM)'s share price has fallen from a peak of $36.63 to an "ankle" style to $3.5 today.
For the majority of small and medium shareholders, the cheetah stock is defrosting;
For the actual controller Fu Sheng, the cheetah will become his honey in the future.
Because after weighing the relationship between motivation, maneuverability, cash, asset quality and new business value and market value, we find that Cheetah Mobile may be the most privatised of all current Chinese stocks.
01 No lack of motivation or operability
For a company whose main business faces the ceiling, the US stock market is often stingy, and even if it has some advanced productivity genes (such as the mobile Internet) and good book cash, it is not easy to get a valuation premium.
Cheetah movement happens to be such a typical example.
For a long time, Cheetah Mobile's stock has clearly fallen into a liquidity trap. The daily trading volume is only about one or two million dollars, and the price-earnings ratio is as low as three times.
Such awkwardness has greatly highlighted the value of its privatization: it has sufficient cross-market arbitrage motives.
Cross-market point of view: against the A-share IT plate 54 times the median price-to-earnings ratio, book cash 3.423 billion yuan, interest debt of 0 and is still in a profitable state of cheetah movement, can be described as undervalued.
Another sub-item for underestimation is that the cheetah has been holding more than 400 million active users through so many years of precipitation - such traffic value is a proper head in the A-share IT field.
Beyond motivation, there is no barrier to the operability of cheetah mobile privatization:
Privatizing and delisting of U.S. stocks is relatively simple. The, SEC (Securities Regulatory Commission has only two rules on this: it is initiated by at least one controlling shareholder (holding more than 50 per cent) and the acquisition of tradable shares needs to be made in cash.
According to the stock ownership structure of the cheetah movement, the company's internal executives (Fu Sheng et al.) and the related party Kingsoft software have a total of 57.36%.
This means that if the two make privatization offers to listed companies as concerted actors, they can be privatised simply by recovering 42.64 per cent of the shares in circulation.
02 The cash reserve has exceeded the cost of Privatization.
So the question is, how much does it cost to acquire a listed company?
We can roughly measure it with the following formula:
EnterpriseValue (enterprise value) = Market Capitalization (market value) Debt (interest liability)-Cash (cash).
Take cheetah, for example, how much does it cost to privatize without a premium?
The result may be a shock to you:
Cheetah internal executives (Fu Sheng et al.) and related party Jinshan Software reclaimed 42.64% of the shares in circulation, corresponding to a market value of RMB 1.535 billion (42.64% * 500 million US dollars). The cash balance of Cheetah's Q19 account in 2019 was 3.423 billion yuan, and the interest-bearing liability was 0.
According to the previous company calculation, if the cheetah executives and Jinshan jointly carry out privatization, they will not only spend money, but also earn 1.888 billion yuan (15.35+0-34.23).
Cheetah major shareholder
In the case of privatization of Chinese stocks, privatization is often successful at a premium of 5% to 30% compared with the announcement of a deal. For privatizing cheetahs, even at a 30 per cent premium to the current price, its cash reserves are enough to cover privatised costs.
It is worth mentioning that we have compared over 200 middle-and-almost stock companies to observe their "Cash/ (interest-interest liability + market value)" and find that there is no more privatisation value than cheetah. As the length is limited, Top7 is only listed in the following figure.
Excluding financial companies with more cash and years of singular stocks, only Jumeiyou (NASDAQ: JMEI) is slightly better than the cheetah in the data. However, comparing profitability with valuation, 2017-2018:
Jumei Premium's operating profit is negative, and the current P/E ratio is as high as 16 times (the net profit in 2018 is brought by the investment business, so it can get the P/E ratio indicator);
Jaguar mobile operating profit is positive, and the current price-to-earnings ratio is only three times.
03 Asset quality: sufficient cash flow safety pad
Of course, the cheetah is in the name of the "most" of privatisation, and the current balance sheet and past performance are only one aspect, and the value of its main business in recent years (asset quality) should also be seen.
The main business of Cheetah in 2019 is as follows:
Tool applications, including Cheetah Cleanup Master, Fun Input, Cheetah Security Master, etc., profit model is third-party advertising agency and direct advertising revenue. The income is 498 million yuan and the operating profit is 123 million yuan.
The tool Application of cheetah
Liveme live and mobile game products, the latter includes "Piano Block 2", "Rolling Sky", "Dancing Line", etc. The profit model is the value-added service income of the APP purchase, including live gifts, game props and so on. The live and mobile game business revenue was 556 million, and the operating loss was 0.44 billion yuan (the profit of mobile games was maintained, and the live broadcast continued to cause losses).
Cheetah's mobile games
At present, there are about 435 million monthly users of Cheetah's global mobile terminal, 70.3% of which are from overseas. While the product portfolio of tool apps plus mobile games (mainly casual games) doesn't see much growth, it can also contribute to stable profits (even if the app is maliciously accused, the revenue declines). In the past five years, the total cash inflow of cheetahs has reached 2.7 billion yuan, with an annual appearance of 300 million to 900 million.
What Cheetah has to do now is to apply the less viscous tools to the users, import the more viscous live broadcast and mobile game business, and improve the LTV (life time value), which is the total value of the user life cycle:
The live broadcast platform that has been in operation for more than three years is a major target. In 2017, it also got the B round of financing with a headline of 50 million US dollars. The current income is already considerable but it is still in the net investment.
In addition, 435 million users still have other ways to realize the possibility. Such as short video, Internet finance and so on.
Use the Boston matrix to analyze the current cheetah, which uses this cash flow business to drive mobile games (casual) into star business, further incubating AI business (Orion Star AI service robot, AI word treasure, Xiaobao AI translation bar, etc. The path of this thin dog business is very clear.
Boston Matrix: Cheetah Business Analysis
In conclusion, the current panther has a lot of cash on account, low market value, good cash flow of business, and a slight look at the new business, with the title of``the most private-valued medium stock'' .
On the premise of not lack of motivation and operability, as to whether to do so, see Fu Sheng and Lei Jun how to think.
This article from the micro-channel public number: Alpha Workshop (ID: alpworks), Author: Du Chong
* The article is an independent view of the author, and does not represent the position of the tiger's olfactory network. The paper is published by the Alfa Factory and is edited by the tiger's olfactory network. The transfer of this article is subject to the consent of the author, and please attach the source (tiger sniffer net) and the link on this page. Link: https://www.huxiu.com/article/308116.html
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