Author Topic: JD - JD.COM  (Read 47074 times)

lucasnascimento

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Re: JD - JD.COM
« Reply #20 on: June 07, 2018, 05:00:02 PM »
Interesting thread, the short rebuttal was a good read.  Both sides seem to have good points.

I haven't followed this name closely, I know it's a hedge fund hotel, but a short based on valuation seems a little shaky here.

China is an interesting market.  Before the 08 crash there was a LOT of China hype too, no one could go wrong buying Chinese equities.  It's a strangely fascinating thing, I get that it has 1b+ people and is undeveloped.  But so is India, and India gets zero investment attention.  I understand that non-Indians can't buy Indian equities, but China is the same.  You're buying into a VIE that has a contractual relationship with the underlying entity.  Why can't they do this in India?


Do longs look at this as a buy and hold forever deal? Or is it more of a growth isn't being valued, so you buy until it's valued?

It amazes me how readily investors in Chinese companies via this structure disregard the risk of waking up one day to find that they now own nothing more than a tiny interest in a Cayman Islands PO box. Or, less flippantly, the principal-agent problem already looms large in investing, why invest in a situation in which the "agents" (management and the Chinese communist party) are completely beyond the reach of the "principals" (foreign investors)?


To address this issue, take a look at https://www.wsj.com/articles/a-spark-that-could-light-up-chinas-internet-giants-1520247521, http://www.scmp.com/business/companies/article/2139703/beijing-fast-tracks-foreign-listed-chinese-tech-firms-share and today's https://www.ft.com/content/7e243658-6a0c-11e8-8cf3-0c230fa67aec

Since Chinese CDR investors will be subject to the same VIE structure, many US investors would be more comfortable investing in these companies (the thinking being that the Chinese government wouldn’t do anything conniving to its own citizens). Also most people invest into what they know better. It is fair to say that one of the factors many of these Chinese US-listed tech companies are trading at lower multiples than they should be (Charlie Munger shares that thinking https://www.cnbc.com/2018/05/07/charlie-munger-chinas-best-companies-cheaper-than-us.html), is due to the fact their Chinese customer-base can’t invest in these foreign-listed shares due to capital controls, and US investors have never used these platforms.

All in, this is likely to be a great catalyst for the stock going forward.
« Last Edit: June 08, 2018, 05:58:24 AM by lucasnascimento »



atbed

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Re: JD - JD.COM
« Reply #22 on: June 21, 2018, 10:42:10 PM »
https://www.ft.com/content/71e9b868-752e-11e8-aa31-31da4279a601

"China is preparing to pass a wide-ranging law that would hold ecommerce platforms run by Alibaba, JD.com and Tencent liable for fraudulent goods sold by vendors on their sites."

Does this reduce one of JD's advantages at a time when their biggest competitor is already investing heavily into logistics/fulfillment?
« Last Edit: June 21, 2018, 10:47:28 PM by atbed »

Broeb22

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Re: JD - JD.COM
« Reply #23 on: June 22, 2018, 06:48:31 AM »
I personally believe anything that removes friction in the customer experience is a positive for eCommerce as a whole. And anything that makes people more likely to buy online should help JD in the long-term. 

Does it level the playing field for Alibaba relative to JD? Possibly, but this is a YUGE market. There is probably room for at least two players of scale. I'm more concerned about some better mousetrap coming out of the woodwork to displace JD than I am about Alibaba eating JD's lunch and putting it out of business.

Another perspective is generally that incumbents tend to benefit from regulation. If you're an upstart competitor to JD, how in the world are you supposed to ensure sellers on your platform are selling authentic goods? How much will it cost to do that? In my opinion, this probably benefits JD long-term.

lucasnascimento

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Re: JD - JD.COM
« Reply #24 on: June 22, 2018, 08:39:01 AM »
https://www.ft.com/content/71e9b868-752e-11e8-aa31-31da4279a601

"China is preparing to pass a wide-ranging law that would hold ecommerce platforms run by Alibaba, JD.com and Tencent liable for fraudulent goods sold by vendors on their sites."

Does this reduce one of JD's advantages at a time when their biggest competitor is already investing heavily into logistics/fulfillment?

This is way more negative for BABA compared to JD. Don't even think that would be an issue for JD.
BABA will have to spend much more in authenticity control since JD is way ahead in terms of quality control. BABA's 3P Gross GMV is more than 4 times higher than JD's, what means BABA would have to spend 4x more at least.

Authentic products is JD's mantra. Richard Liu has anticipated this trend since the beggining of JD. The shift towards customer experience will be very costly to BABA, and it will take time.

Don't really believe this regulation will change much given the difficulty to track billions of orders and millions of merchants. And if you cut all the counterfeit today from BABA, a large piece of its GMV will be gone with the 3P fees and advertising revenue. Not sure if the Chinese government really wants to crush its major tech company and let millions of merchants unemployed.


« Last Edit: June 22, 2018, 08:44:17 AM by lucasnascimento »

walkie518

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Re: JD - JD.COM
« Reply #25 on: June 22, 2018, 02:22:26 PM »
Interesting thread, the short rebuttal was a good read.  Both sides seem to have good points.

I haven't followed this name closely, I know it's a hedge fund hotel, but a short based on valuation seems a little shaky here.

China is an interesting market.  Before the 08 crash there was a LOT of China hype too, no one could go wrong buying Chinese equities.  It's a strangely fascinating thing, I get that it has 1b+ people and is undeveloped.  But so is India, and India gets zero investment attention.  I understand that non-Indians can't buy Indian equities, but China is the same.  You're buying into a VIE that has a contractual relationship with the underlying entity.  Why can't they do this in India?


Do longs look at this as a buy and hold forever deal? Or is it more of a growth isn't being valued, so you buy until it's valued?

It amazes me how readily investors in Chinese companies via this structure disregard the risk of waking up one day to find that they now own nothing more than a tiny interest in a Cayman Islands PO box. Or, less flippantly, the principal-agent problem already looms large in investing, why invest in a situation in which the "agents" (management and the Chinese communist party) are completely beyond the reach of the "principals" (foreign investors)?

My thinking is that if it looks like a duck, walks like a duck, and quacks like a duck...

there are no other options other than the VIE structure to transfer ownership of earnings rather than the ownership of Chinese-owned assets ... the most sophisticated attorneys and investors came together to make the vehicle for purpose of opening the US capital markets to Chinese companies; I think this is here to stay and investors either get comfortable or don't buy the shares

JD may have its own problems, maybe there's fraud, maybe tons of fake product, but these are company specific matters that should get ironed out by investor due diligence, I would think Google likely took a good look though, of course, validation doesn't mean verification

Liberty

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Re: JD - JD.COM
« Reply #26 on: July 03, 2018, 09:47:01 AM »
Wiedower Capital 1h18 letter, contains a long section about JD:

http://wiedowercapital.com/files/Letter1H18.pdf
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randallchsu

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Re: JD - JD.COM
« Reply #27 on: July 03, 2018, 07:44:38 PM »
Wiedower Capital 1h18 letter, contains a long section about JD:

http://wiedowercapital.com/files/Letter1H18.pdf

JD is a pretty good place to buy things. I would continue to use their services, but I think the emphasis on logistic and customer satisfaction is overblown.

First of all, logistic infrastructure is crazy good in China, so the marginal benefit is at best like a domestic short-haul flight. Unless you are a higher tier frequent flyer member, you don't really care which carrier you fly with.

The most important thing is price and selection. I recently bought four pieces of apparel on Tmall from Massimo Dutti (a brand of Zara), and they arrived next day from Beijing to Shenzhen with impeccable packaging and delivery.

Although Alibaba doesn't control the logistic, built-in incentive structure will ensure the delivery experience is satisfactory. The Cainiao network is the Uber of courier delivery services, each delivery guy is responsible for his own P/L, and if he gets many poor ratings from customer feedback, that'll impact his income.

In terms of customer satisfaction, JD changed the T&C of the plus member program during my membership period, so I got less vaule than what was originally promised. It caused an uproar from many plus members and plenty reporting on this in Chinese, one example (https://www.ithome.com/html/it/348644.htm).

I got plenty of bad experience with JD. More than half a dozen of time, a JD delivery guy would just put my package outside my door without telling me (viewing it from the positive side, business is too good for delivery to handle). Item went missing, and I had to contact customer service multiple times for help. Every time the online CS promised someone will call me to follow up but never did. Finally after about a month, a JD delivery guy just showed up with the item.

The future of retail is evolving extremely quick in China. I used to order plenty of grocery using JD's on demand delivery Dao Jia. Ever since a Hema Supermarket opened up nearby, I moved all our household grocery spending to Hema.

So my point is probably there are plenty of bad experience to talk about with any of the retail platforms in China. In the end, the experience is not significantly different and the differentiation is quite small and could easily be disrupted. You can pretty much find all the SKUs that's on JD either on Taobao or Tmall.

thowed

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Re: JD - JD.COM
« Reply #28 on: July 04, 2018, 04:51:34 AM »
Many thanks for your personal insights - it's hugely valuable.

The JD.com story has been quite compelling, but I think a lot of people (including myself) are limited in our understanding by not being 'on the ground' and actually experiencing it.

Liberty

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Re: JD - JD.COM
« Reply #29 on: July 19, 2018, 10:50:04 AM »
11-minute interview with Richard Liu:

https://www.youtube.com/watch?v=z_jbICAhfTg
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