IPO Report: eHi Car Services Ltd (EHIC)

Francis Gaskins |

eHi Car Services IPO, eHi Car Services IPO price, eHi Car Services IPO date, IPOs this week, small-cap stocks, stocks to buy noweHi Car Services Ltd (EHIC) is the No. 1 car services provider and No. 2 car rentals provider in China in terms of market share by revenues in 2013, according to Frost & Sullivan. It is based in Shanghai, China.

Nine other companies are scheduled for the week of Nov. 10, 2014.  The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint-managers: J.P. Morgan, Goldman Sachs (Asia)

Co-managers: None

End of lockup (180 days): Wednesday, May 13, 2015

End of 25-day quiet period: Tuesday, December 9, 2014

EHIC scheduled a $130 million IPO with a market capitalization of $739 million at a price range midpoint of $13 for Friday, Nov. 14, 2014 on NYSE.

eHi Car Services IPO Report

Summary

EHIC is the No. 1 car services provider and No. 2 car rentals provider in China in terms of market share by revenues in 2013, according to Frost & Sullivan.

The top three players in China's car rental and car service industry, including EHIC, in aggregate accounted for 10.7% of the market share by revenues in 2013, according to Frost & Sullivan.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing June 6 mos

         

eHi Car Services Ltd (EHIC)

$741

6.0

-112.3

1.8

1.8

18%

             

Conclusion

Neutral plus

6x sales, still losing money, P/E  of -112

rev +48%

Price-to-book is 1.8

No. 1 car services provider & No. 2 car rentals provider in China

Business

EHIC is the No. 1 car services provider and No. 2 car rentals provider in China in terms of market share by revenues in 2013, according to Frost & Sullivan. The top three players in China's car rental and car service industry, including us, in aggregate accounted for 10.7% of the market share by revenues in 2013, according to Frost & Sullivan. EHIC believes such high market fragmentation presents a strong potential for its future growth and industry consolidation.

Since its establishment, EHIC has focused on investing in its infrastructure and technology, which enables it to benefit from increasing economies of scale. EHIC believes that its broad geographic coverage, efficient fleet management, leading brand name, complementing business model and innovative services differentiate ourselves from major competitors and build a solid foundation for its long-term success, as demonstrated by the following:

As of June 30, 2014, EHIC had the broadest geographical coverage among all car rentals and car services providers in China as measured by the number of cities in which services are provided directly, according to Frost & Sullivan. EHIC operates all its 760 service locations in 90 cities across China directly to ensure consistent and high-quality services.

From January 1, 2012 to June 30, 2014, EHIC’s fleet size increased from 7,717 to 15,409, while EHIC generally maintained a car rental fleet utilization rate of over 70% during the same period. According to Frost & Sullivan, EHIC had the highest fleet utilization rate among the top five car rental companies in China in 2013.

EHIC’s "eHi" brand is one of the most-recognized brands in China's car rental and car service industry, according to Frost & Sullivan. As of June 30, 2014, EHIC had over 550,000 registered members and over 32,000 corporate clients that used its car rentals and car services, respectively.

EHIC provides one-stop comprehensive services to both individual customers and corporate clients. This business model, together with EHIC’s leading positions in both China's car service market and car rental market, enables it to cross-sell to different target customers and capture complementary and evolving market opportunities.

EHIC utilizes mobile and Internet platforms to provide O2O mobility solutions. EHIC believes it was the first car rental service provider in China to introduce dedicated mobile applications for its customers to make reservations. In the six months ended June 30, 2014, 52.8% and 30.0% of its car rental services were derived from reservations made through its website and mobile applications, respectively.

Intellectual property

As of the date of the prospectus, EHIC registered 17 software copyright in China.

EHIC believes brand recognition is key to its success. EHIC has registered 85 trademarks, including "eHi Car Rental" and  LOGO , with the relevant authorities in China for its brand name "eHi" and associated logos that EHIC uses or plans to use to market its services or to prevent others from competing with it by using similar logos. In addition, EHIC has registered 185 domain names in connection with its brand name to prevent any dilution of its brand name, of which 67 have been registered in the PRC and 118 have been registered in other countries.

Competition

According to Frost & Sullivan, the top three players in this market in aggregate accounted for 10.8% of the market share by revenues in 2013. Car Inc. has 8.1% of the market; eHi has 1.5%; and Avis China has 1.2% of market share.

5% shareholders pre-IPO

Ray Ruiping Zhang        9.9%

JP Gan             11.7%

John Zagula      8.9%    

Dividends

No dividends are planned.

Use of proceeds

EHIC expects to receive $113 million from its IPO and use it for the following:

$120 million to expand its fleet;

$20 million to expand its service network;

and the remainder for general corporate purposes, including working capital and funding potential acquisitions.

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
EHIC eHi Car Services Limited American Depositary Share 10.18 -0.02 -0.20 20,978

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