Update on active Ideas #4
I have been taking a bit of a break in the past few weeks, I have been selling down some of my Chinese stocks as they ran up. Adding to some others. And I have a new quick idea.
First, Dada Nexus (DADA) has not really played out all that well. I sold it for a loss at about $2.15 (got in at about $2.35), then got back in at $1.93 before Q1, but by the looks of it they are in a price war to get more market share as the on demand delivery market is very rapidly growing. With a penetration of only 10-15%. JD Now has about 25-30% market share, and the company has been continuously expanding their free delivery program in the past 9 months, which is why revenue growth has been really disappointing for JD Now. Although it has accelerated growth at Dada Now.
So I sold most of my shares again, but still held a small 1.6% position, and will probably get back in as it keeps dropping. I think in the medium term this is still a $4-5 stock when the on demand delivery market matures and DADA reaches the scale to become profitable (or is bought out by JD as these businesses are so intertwined). I think in the long term this is basically a duopoly/oligopoly that will be very profitable. Question is, when will this happen? The market for Chinese stocks is not that forward looking. And there are plenty of other options where I can park my money in the meantime.
I still hold about 90% of my Douyu (DOYU) shares, that stock has at least performed nicely. Still trading at about a third of net cash. HUYA has had nice results and now trades at a premium to book value. As a reminder, HUYA and DOYU are very similar and both have Tencent as a major shareholder. I think there is a decent chance DOYU will start returning capital when the CEO situation is resolved. Especially if he receives a large fine and needs to unlock value from his DOYU shares. So continue to hold (but probably sell if it reaches 55-60% of net cash on no news). Kinda wish I made it larger, but glad I stopped trading around this stock.
Spanish Broadcasting (SBSAA) posted results. The good news is that EBITDA is expected to increase over 100% in H1 2024. And that TV assets are expected to be sold within a year for possibly $30 million. As assets held for sale are listed at that amount on the balance sheet.
The bad news is that expected EBITDA growth seems primarily because of cost cuts and not revenue growth. And Q4 was quite mediocre. I think the company will be sold either in part or full a year from now because Alarcon has no choice. Will be interesting to watch over the next 2 years. I bought some more bonds a month ago.
Disclaimer: Readers of this blog should do their own due diligence before buying or selling any of the mentioned stocks, since I have been wrong before and cannot guarantee all information in this write-up is 100% factual. I may buy or sell the above mentioned stocks at any time. Past success is no guarantee for future success. Some of the stocks mentioned might have poor liquidity, so make sure to check average daily trading volume before buying or selling anything. I am not your financial advisor.
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