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Summary

  • China’s No. 1 online retailer of beauty products as measured by gross merchandise volume, with a market share of 22.1% in 2013.
  • 2013 top line revenue grew 107% to $483 million. Profits grew to $25 million from $8 million.
  • 89% of 2013 orders came from repeat customers.

Based in Beijing, China, Jumei International Holding Ltd (NYSE:JMEI) scheduled a $195 million IPO on the NYSE with a market capitalization of $2.9 billion at a price range midpoint of $20.50 for Friday, May 16, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint Managers: Goldman Sachs (NASDAQ:ASIA), Credit Suisse, J.P. Morgan

Co-Managers: China Renaissance Securities (Hong Kong) Limited, Piper Jaffray, Oppenheimer & Co.

End of lockup (180 days): Wednesday, November 12, 2014

End of 25-day quiet period: Tuesday, June 10, 2014

Summary
JMEI is China's No. 1 online retailer of beauty products as measured by gross merchandise volume, or GMV (gross merchandise volume), with a market share of 22.1% in 2013, according to the Frost & Sullivan report.

2013 top line revenue grew 107% to $483 million. Profits grew to $25 million from $8 million. Cash provided by operating activities increased to $85 million from $27 million.

89% of 2013 orders came from repeat customers.

The P/E based on 2013 earnings is 86. However, the P/E based on annualizing the March '14 quarter is 45.5.

General Atlantic Singapore Fund Pte. Ltd., a non-US and non-affiliated entity, has agreed to purchase from JMEI US$150,000,000 in Class A ordinary shares at a price per share equal to the initial public offering price per share.

GASingapore has the right to with draw the offer if the IPO is priced above the range top of $21.50.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

12 mos endedQ1 '13

Cap (NYSE:MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Jumei International Holding Ltd

$2,911

5.5

85.6

7.3

7.3

7%

annualizing Q1 '14

4.7

45.5

   

Conclusion
The rating on JMEI is buy.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

JMEI is China's No. 1 online retailer of beauty products as measured by gross merchandise volume, or GMV, with a market share of 22.1% in 2013, according to the Frost & Sullivan report.

JMEI has grown rapidly and substantially since it launched its jumei.com website in March 2010 and achieved its current scale and profitability with only US$13 million in total funding from its private equity investors.

JMEI achieved US$483.0 million in net revenues and US$25.0 million in net income in 2013, with 10.5 million active customers during the same period.

JMEI believes that its internet platform is a trusted destination for consumers to discover and purchase branded beauty products and fashionable apparel and other lifestyle products.

Net revenues
Net revenues increased by 107.1% from US$233.2 million in 2012 to US$483.0 million in 2013, which included US$413.1 million generated from merchandise sales and US$69.9 million generated from marketplace services.

This increase was primarily attributable to the increase in the number of active customers and total orders.

The number of active customers increased significantly from approximately 4.8 million in 2012 to approximately 10.5 million in 2013.

The number of total orders increased from 15.7 million in 2012 to 36.0 million in 2013, among which the total number of orders fulfilled by the logistics centers increased from 15.6 million in 2012 to 30.3 million 2013.

Seasonality

Overall, the historical seasonality of JEMI's business has been relatively mild due to rapid growth. However, sales in the traditional retail industry are significantly higher in the fourth quarter of each calendar year than in the preceding three quarters.

JEMI's gross profit as a percentage of net revenues was lower in the first quarter as compared with the other quarters in each of 2012 and 2013. This is primarily because JEMI had the highest volume of promotional and marketing activities in the first quarter of each of these years.

Concurrent private placement
Concurrently with, and subject to, the completion of this offering, General Atlantic Singapore Fund Pte. Ltd., a non-US and non-affiliated entity, has agreed to purchase from JMEI US$150,000,000 in Class A ordinary shares at a price per share equal to the initial public offering price per share

Under the subscription agreement executed on May 6, 2014, if the initial offering price is greater than US$21.50 per ADS, the investor has the right to terminate the subscription agreement

Multiple sales formats

Leveraging its deep understanding of customer needs and preferences, as well as its strong merchandizing capabilities, JMEI has adopted multiple effective sales formats to encourage product purchases on its platform.

JMEI's current sales formats consist of curated sales, online shopping mall and flash sales.

JMEI's curated sales represents a new online sales format, whereby it recommend a carefully selected collection of branded beauty products for a limited period of time at attractive prices.

JMEI's curated sales format captures online shoppers' attention through product recommendations and insightful product descriptions, which has helped it build a strong customer base.

JMEI also sells a wider selection of branded beauty products through its online shopping mall on a long-term basis to enhance customer stickiness.

To further enhance and complement its customer experience with more choices, JMEI provides a limited-time offering of fashionable apparel and other lifestyle products at deep discounts through flash sales.

Dividend Policy

No dividends are planned.

Competition

The retail market of beauty products in China is fragmented and highly competitive.

JMEI faces competition from traditional beauty products retailers, such as Watsons and Sephora, and online beauty products retailers, such as Lefeng, as well as e-commerce platform companies, such as

Alibaba Group, which operates Taobao.com and Tmall.com,

Amazon China which operates Amazon.cn,

JD.com, Inc., which operates JD.com, and

E-Commerce China Dangdang Inc., which operates Dangdang.com.

5% stockholders

Super ROI Global Holding Limited 40.7%

Sequoia funds 18.7%

K2 Partners L.P. 10.3%

Success Origin Limited 8.8%

Pinnacle High-Tech Limited 6.3%

Use of proceeds

JMEI expects to net $323 million from its IPO, including the concurrent private placement, see above. Proceeds are allocated as follows:

to invest in its marketing and branding efforts, including setting up additional physical stores and growing its exclusive products portfolio, expand its logistics network and enhance its fulfillment capabilities, strengthen its IT infrastructure and systems, and for general corporate purposes, which may include working capital needs and potential acquisitions, investments and alliances, although JMEI is not currently negotiating any such transactions.

Disclaimer: This JMEI IPO report is based on a reading and analysis of JMEI's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Jumei International Holding Ltd