To not increase my China exposure, which is at somewhat uncomfortable high, I decided that for every China exposure holding going in, another one has to go out. This means to make space for my new holding YY.com which I’m very excited about, I have to throw out one. The Chinese holding I have not yet done a full due dilligence on is Ctrip, and for no other reason than that, it is the weakest card in my portfolio. So out goes Ctrip in in comes YY.com at the same dollar values (approx 5% weight), as of today’s close.
From Vlogs to Live streaming
I have been very fascinated about the whole Vlog (Video log) scene, and how big it has grown in just a few years in western countries. I find myself watching more and more quality content on YouTube, but also spending more time on “crap”. With crap I mean following some person through their daily life or just someone doing silly things online. China has managed to take this to the next level through online streaming, where hosts interact with their audience. YY.com and their competitors have implemented a very clever system in terms of how viewers pay. I’m very sure people get hooked on it, and I’m sure we are just at an initial stage of growth. What I’m less sure of is if YY.com is the right horse to bet on, but as far as I have been able to gather, they are. As I said I’m excited about this holding and I hope to find the time to write a full report on the stock this weekend.
Until then, this is a very excellent piece on the topic and I will base a lot of my post about YY on this article: Livestreaming Trend in China
6 thoughts to “YY.com in Ctrip out”
I’ve seen a handful of VC/think tank estimates indicating that the China livestreaming TAM could grow anywhere from 4-6x on a revenue basis by 2022 (vs $1.8B in 2016). China Unicom specifically called out a livestreaming app (Kuaishou) as the largest driver of network traffic during early 2016. I like the way you are thinking here, but the more likely horse (IMO) seems like MOMO. Kuaishou (livestreaming/snapchat for Tier 5-7 cities I believe) would be another great way to play this, but I don’t think it will do an IPO until summer).
I’ve seen stats from QuestMobile showing MOMO has the 4th largest social network in China (livestreaming is now 60% of revs from zero a year ago) plus it is mobile-first (vs YY’s mostly PC- based users). For smartphone users under 35 or in a Tier 3 or lower city, MOMO has more popularity than Weibo (but still less than Tencent’s QQ+WeChat). MOMO used to be a Tinder-esque hookup app, but mgmt seems to have successfully pivoted its core location-based tech to funnel livestreaming content that is “closer” geographically to a user. Has made a solid rebound in MAUs/DAUs (started growing DAUs y/y again in Nov/Dec 2016) which contrasts pretty starkly against YY’s stagnating user base.
YY has seen MAU growth stall over the past year (only added ~3M net MAUs since the end of 4Q15…140M in 4Q15 to ~143M in 3Q16) and there is de minimis detailed discussion on the conf calls or in the press releases about mobile MAU growth. In a country with over half a billion new LTE phones are being sold annually (vs less than 10% of that volume in PC shipments) an internet company’s share of mobile MAUs is really the only stat that matters (even more so when you are in a fast growing field like livestreaming). Don’t get me wrong, YY has solid cash flow dynamics but I agree with Dave that there isn’t much to drive multiple expansion unless their MAU growth perks up unexpectedly.
Alternately you could just own Tencent since (according to the latest CNNIC report) folks open WeChat 25x a day!
Yes YY has not been able to launch a killer platform for mobile, it seems their PC users har not happy moving to mobile and new users who never used PC, jump to other rivals.
I guess my point of my analysis is, the PC users who doesnt want to move to YY’s mobile, also wont like MOMO’s mobile. So they will keep their fairly loyal user base. Then they have other legs to grow in, like online-dating, the gaming livestreams and education.
I see this more as a value-play rather than a high high growth case, it’s not needed, they are generating huge amounts of cash already. As a upside kicker, IF they get their mobile solutions up to scratch, we could see further growth and upside. As long as they keep their PC user base and online-dating keep doing well, this company is cheap, they don’t need to grow that much more.
Obviously the stock is very interesting but let me ask you, what do you think is going to be the catalyst here?
The stock has been cheap for a long time…
I don’t really agree, in 2014 the stock was trading close to 100 USD, I would be happy to sell my shares at that price today. Back in 2014 the 95 USD valuation was more based on future growth and less on actual bottom line cash generated. Now they are generating the cash and still growing, it has transformed from a growth stock to a value stock. I’m waiting for the value investors to step in and take over, if that takes a while, so be it. As long as the company continues to deliver.
“I’m very sure people get hooked on it, and I’m sure we are just at an initial stage of growth. What I’m less sure of is if YY.com is the right horse to bet on, but as far as I have been able to gather, they are.” This does not sound like a big position to me. 5% are pretty big.
SEB, I agree, but I had a high cash balance already and that was the weight I had Ctrip at. After finishing my full analysis I now feel fairly comfortable to hold a 5% position. It’s a fairly speculative stock, but I think the company has proved itself as a innovator that always finds a new leg of growth.