2024 Week 33

ChicMax, East Buy, Be Friends, C.Banner, Daphne, Cosmo Lady

Written on 19th August 2024

Who’s who on douyin? - ChicMax

On Week 31, I talked about ChicMax and its profit alert. It seems that most of the revenue growth (and possibly profit growth) are coming from Douyin. 

According to Feigua Data, Douyin’s beauty category sales are up 28% reaching 97.7 billion RMB in the first half of the year and could possibly exceed taobao GMV for 2024. 

Grabbing the chart from Feigua, it seems like the leading brand which dominated Douyin for the past 6 months is Kans (韩束) from ChicMax. This helped to explain their profit alert 2 weeks ago. 

While Kans is on the gold medallist spot, it seems that there is not a consistent silver or bronze medallist. 

We can look at this as a half-full or half empty situation. 

Half-full: Kans is such a standout that no one is close to usurping their gold position

Half-empty: The introduction of Douyin as a platform has leveled the playing field.

I am unsure on how to evaluate the cup so this looks like it is going into the too hard bucket.

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Who’s the best? KOL vs Product - East Buy, Be Friends

I was pleasantly amused when I found out that there is ecommerce streaming for durian on Shopee. 

I have always assumed that ecommerce streaming is akin to home network shopping of the past - most probably like Qurate. After my durian experience, I started to understand why selling through streaming has its appeal. 

The seller is a pretty girl on screen, greeting their regular customers as they come into the “store”. You get an introduction on the durian on sale for the day, perhaps choose the durian and have it delivered to you in 2 hours time while in the comfort of your home.

Except for the smell, you are getting almost the whole retail experience. 

I guess the ecommerce streaming model does make sense if you want to mix entertainment and shopping together. 

One of the new companies that is in this sector is East Buy Holdings. 

A cursory look at the share price here would have given you the idea that ecommerce streaming is a fad and is dying. But there is a bigger story behind these numbers. 

The story revolves around the biggest Chinese star in the ecommerce streaming space versus the company he is in. For the detailed story, click here.

In a KOL (key opinion leader) or influencer economy, such as the live streaming business of East Buy, it is the influencer that matters most.

-https://chinahandsmagazine.org

So between the CEO and the KOL, who should the shareholder choose?

I guess you know where this is heading. It is the KOL who survives the shakeup. 

After a few months of turbulence, the story gets even weirder when the KOL, Mr Dong Yuhui gets to depart the company on pretty generous terms. 

The 99/1 rules work here. 1 percent of the KOL will get 99 percent of the reward and the special one gets to walk away with a highly profitable company. 

Since everyone knows about the KOL’s issues now, any streaming company will try to disassociate their business model from KOLs. 

BeFriends another company in the space have decided to be a ecommerce streaming company “without” the KOL. Instead of using KOL as a draw,  BeFriends will be relying on their good choice of goods. The goods sold through the ecommerce streaming platform would be authentic and good. 

But if you take away the entertainment, the pretty girl, handsome boy or a literary scholar like Dong Yuhui, isn’t this reverting back to become the home shopping network of the past?

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Who’s turning head? - C.Banner, Daphne, Cosmo Lady, 

Long long time ago, I helped out in the IPO of Hongguo International Holdings on the SGX. Hongguo, or now known as C.Banner International Holdings distributes its ladies shoes primarily through department stores and independent retail stores. 

Another top brand of the past in that ladies shoe category is Daphne International Holdings (Daphne) Limited.

Specialty-fashion retailers are a tough space to be in. You make good money when times are good and slowly but surely fade out of the game with no recourse.

But the good news is that if you zoom in to the last 3 months, some of these companies stock has been on a mend. 

Daphne posted a positive profit alert of HKD 50m making the annualised 4x PE. 

With a market cap of HKD 423m, cash of RMB 366m, this seems like a good trade for a turnaround. 

Another top dog of the past, Cosmo Lady, has also released a profit alert of not less than 200% making this an annualised 4x PE as well.

Valued at HKD 595m, and having almost RMB 1,000m in liquid assets, the margin of safety for this looks even better. 

My fuzzy theory of why some of these lower tier brands are doing better

1. Chinese consumers are trading down,

2. the 3,4,5 tier cities are doing much better and

3. brands which were the top dog of the past (with some brand recall) are having their days again. 

But it is often hard to really know if a brand is on a mend or not.

But in the event they really do, some of these could be a multi-bagger in no time.