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Summary

  • JMEI, the largest Chinese online beauty products retailer, plans to raise $194.8 million in its upcoming IPO.
  • JMEI is well poised to take advantage of the increase in Chinese consumer spending, has posted strong growth figures the past few years, and has strong leadership.
  • We rate this IPO a Buy.

Jumei International Holding Ltd (NYSE:JMEI), a Chinese online beauty products retailer, plans to raise $194.8 million in its upcoming IPO.

The Beijing, China-based firm will offer 9.5 million shares at an expected price range of $19.50-$21.50 per share. If the IPO can hit the midpoint of that range at $20.50 per share, JMEI will command a market value of $3.3 billion.

JMEI filed on April 11, 2014.

Lead Underwriters: Credit Suisse Securities LLC, Goldman Sachs LLC, J.P. Morgan Securities LLC

Underwriters: China Renaissance Securities (Hong Kong) Limited, Oppenheimer and Co Inc, Piper Jaffray & Co

JMEI: Largest Chinese Online Beauty Retailer

JMEI is China's largest online beauty products retailer in terms of gross merchandise volume, having achieved a market share of 22.1% for 2013.

The firm sells beauty products through various types of sales in order to attract new customers and maintain the interest of established customers: curated sales, offering a selection of complementary products for a limited time; the "online shopping mall," a more traditional long-term offering of beauty products; and flash sales, offering apparel and other products at deep discounts for a limited time.

(click to enlarge)

(bj.jumei.com/)

JMEI's customer base has expanded rapidly over the past three years, with active customers totaling 1.3 million, 4.8 million, and 10.5 million in 2011, 2012, and 2013, respectively.

Valuation

JMEI offers the following figures in its F-1 balance sheet for the year ended December 31, 2013:

Revenue: $482,996,000.00

Net Revenue: $25,004,000.00

Total Assets: $195,311,000.00

Total Liabilities: $119,651,000.00

Stockholders' Equity: $58,476,000.00

JMEI's revenues have grown very rapidly over the past several years; the firm posted net revenues of US$21.8 million in 2011, US$233.2 million in 2012 and US$483.0 million in 2013. The firm's income figures have improved as well; after a net loss of US$4.0 million in 2011, the firm posted net incomes of US$8.1 million in 2012 and US$25.0 million in 2013.

Operating In a Fragmented Market

JMEI operates in the fragmented retail market for beauty products in China, and faces competition from traditional beauty products retailers, online retailers, and e-commerce platform companies, some of which have access to greater financial and technical resources than JMEI. Competitors include Watsons, Sephora, Lefeng, Alibaba Group, Amazon (NASDAQ:AMZN), and JD.com Inc.

Business-Oriented Leaders

Founder Leo Ou Chen has served as JMEI's chairman and CEO since inception.

Mr. Chen holds an MBA from Stanford University and a bachelor's degree in computer science from Nanyang Technological University in Singapore.

He is joined by co-founder Yusen Dai, who has served as a director and vice president of products since inception. Mr. Dai studied management science and engineering at Stanford University, and later received a bachelor's degree in industrial engineering from Tsinghua University in Beijing.

A Beautiful Conclusion For Investors

We rate this IPO a buy in the proposed range.

JMEI is on the rise at an ideal moment in China, a country with both growing interest in online shopping and an expanding market for beauty products.

The firm has already made significant efforts to capitalize on this auspicious timing through the investment of substantial resources into its mobile platform-in the first quarter of 2014, some 49% of the JMEI's gross merchandise volume came through the mobile platform.

Given the firm's skyrocketing revenue and income figures, JMEI's efforts certainly seem to be paying off.

As American investors have become more comfortable with Chinese IPOs, having purchased nearly a billion dollars in Chinese initial shares in 2013, JMEI should be able to perform well in its initial offering-perhaps boosted as well by the swirl of positive press around Chinese titan Alibaba's upcoming IPO as well.

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Source: Jumei International IPO Could Be Truly Beautiful For Investors