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Temasek buys JD.com stake, eyes China e-commerce

Chinese Internet stocks are under the spotlight this week with a stream of robust earnings and news that Alibaba has been gearing up for a September IPO.

China business district
Source: Bloomberg

JD.com, China’s second largest e-commerce site and Alibaba’s rival, will be in focus today.

It has received a $17.2 million investment from Singapore state-owned investment firm Temasek, according to a filing with the U.S. Securities and Exchange Commission. This translates to a stake of 0.06% for Temasek, based on Bloomberg data.

The Temasek backing will likely further boost investor confidence over JD.com. The Chinese company had its US IPO in May, which raised $1.78 million. Its stock price has gained 58% in the last three months since debuting on Nasdaq.

JD.com
Click to enlarge

 

For Temasek, this is another foray to tap on the booming Chinese e-commerce market. It was an early investor in Alibaba and in April it had also invested in one of China’s largest warehouse developers, Shanghai Yupei Group.

Chinese e-commerce gets more attention

Another recent high profile investment in JD.com had also gotten analysts excited over its prospects. In March, China’s largest Internet company, Tencent, bought a 15% stake. The partnership is expected to ramp up JD.com’s expansion and reduce its operating costs.


Investors should note that JD.com operates more as a direct seller, rather than a pure marketplace model like Alibaba’s Taobao to connect buyers and sellers. This adds a bit of a risk in holding inventory and it has a relatively narrow revenue pool, over 80% was estimated to be contributed by electronics and appliances.

Chinese Internet stocks have been among the outperforming stocks this year. The Kraneshares CSI China Internet ETF, which tracks a sample of Chinese e-commerce companies, has seen a 53% gain over the past 12 months. Whereas S&P 500’s only had an 18% increase, Nasdaq’s with a 24% rise and China H-Shares gained 9% over the same period.

The current earnings season has also been pretty positive for this sector.

This morning, Sina Corp posted better-than-expected growth in both revenue and income. It was lifted by a robust performance from its messaging subsidiary Weibo, which helped pull in more advertising sales.

Earlier in the week, Tencent announced a robust set of Q2 numbers, with a 59% increase in net profit year-on-year.

Ahead of one of the most anticipated IPOs in history, Alibaba had been reportedly gearing up for a roadshow in September. Founder Jack Ma is also lining up meetings with potential investors in Hong Kong, Singapore, London and New York.

 

 

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