IPO Report: 58.com (WUBA)

Francis Gaskins |

58.com ($WUBA) operates online classifieds in China.  WUBA is the largest online marketplace serving local merchants and consumers in China.

Eight other companies are IPOing scheduled for this week. The full IPO calendar can be found at IPOpremium.

Revenue for the six months ended June 30, ’13 was up 48% from the year earlier period, to $59 million from $40 million, and WUBA reported $300,000 in profit.

WUBA is estimating the for the September ’13 quarter revenue was $42 million, with a profit of $8.5 million.

Each ADS represents two Class A ordinary shares

WUBA is based in Beijing, China, and scheduled a $154 million IPO with a market capitalization of $1.2 billion at a price range mid-point of $14 scheduled for Thursday, October 31, 2013. 
F-1/A filed September 27, 2013

Manager, Joint Managers: Morgan Stanley, Credit Suisse and Citigroup

Co-Manager: Pacific Crest Securities

Valuation

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Sept 3 mos

Cap (mm)

Sls

Erngs

BkVlue

TanBV

in IPO

58.com (WUBA)

$924

5.6

27.2

6.5

7.6

17%

WUBA has an accumulated deficit of -$156 million

Glossary

Conclusion

Buy WUBA because of surging, profitable revenue growth.  Annualizing the September quarter profits results in a P/E of 27, very low for a fast growing company.

Business

WUBA operates online classifieds in China.  WUBA is the largest online marketplace serving local merchants and consumers in China, as measured by monthly unique visitors on both its www.58.com website and mobile applications, according to the iResearch Report.

The company’s online marketplace contains a vast amount of credible and up-to-date local information in approximately 380 cities, across diverse content categories, including housing, jobs, used goods, automotive, pets, tickets, yellow pages and other local services.

WUBA conducts automatic and manual screening using proprietary technology and processes to ensure relevance and accuracy of the information on its online marketplace.

The company’s broad, in-depth and high quality local information, combined with its easy-to-use website and mobile applications, has made the company a trusted marketplace for consumers.

WUBA’s online marketplace also provides merchants with an affordable and effective marketing channel to reach a broad and targeted local consumer base.

The company’s sales and customer service teams stay in regular contact with its customers to help them use its online marketing services to achieve optimal marketing effectiveness.

WUBA’s well-recognized brand, "58.com," further helps local merchants to attract consumers in China. As a result, WUBA had 4.3 million active local merchants on its marketplace in the second quarter of 2013.

Seasonality

WUBA’s revenues are relatively lower during the holidays in China, particularly during the Chinese New Year period which occurs in the first quarter of the year, because many businesses are either closed or substantially reduced the level of their activities during the Chinese New Year holiday.

Also, certain business activities, such as recruitment, tend to slow down towards the year end, which might impact revenues in the fourth quarter of the year.

This seasonality of business, however, was not apparent historically due to the rapid growth in revenues that WUBA experienced in recent years.

Competition

WUBA’s competitors include industry or content-specific vertical websites whose information serve the same underlying industries as certain content categories of its online marketplace, as well as smaller or regional online classifieds websites.

WUBA may also face competition from major internet companies, who may enter the online classifieds market in China.

Increased competition may reduce its market share and require WUBA to increase its marketing and promotion efforts, which could negatively affect WUBA’s operating margins or force us to incur losses.

5% stockholders

Jinbo Yao, 28%
Dong Yang, 23%
Frank Lin, 17%
Julian Cheng, 26%

Use of proceeds

WUBA expects to net $167 million from its IPO.

Proceeds are allocated primarily for general corporate purposes, which may include investment in product development, engineering capability, sales and marketing activities, technology infrastructure, capital expenditures, improvement of corporate facilities and other general and administrative matters.

  

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
WUBA 58.com Inc. American Depositary Shares each repres 31.59 1.20 3.95 955,759
CPTP Capital Properties Inc A 13.50 0.10 0.75 4,804

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