TheChek News Flow

Valuations for GrabTaxi, Didi Kuaidi and Ola Cabs total nearly $20 billion together

Three Asian aspirants to the ride-hailing throne have attracted large sums of fresh capital in recent months, bringing their total fundraising to $5.8 billion, closing in on the more than $6.5 billion raised by Uber, according to data from CBI Insights and The Wall Street Journal. As these local Asian startups raise money, they have seen their valuations skyrocket and are now worth nearly $20 billion combined, versus Uber’s current $51 billion valuation.

Singapore-based GrabTaxi Holdings Pte. Ltd., China’s Didi Kuaidi Joint Co. and India’s Ola Cabs have in recent months attracted a range of investors seeking returns similar to the early backers of San Francisco-based Uber, which was founded six years ago.

But their investors are also finding another benefit in these homegrown ride-hailing apps at a time when Uber is raising money to ramp up in Asia: local players may have an edge over Uber in their home markets.

Uber counts India and China as two of its fastest-growing markets and is planning to invest $1 billion in each country this year in a bid to win over riders there.

“Local startups tend to enjoy an advantage in their knowledge of local regulatory issues, which tend to be much more important in emerging markets,” said Richard Ji, managing partner of China-focused tech fund All-Stars Investment Ltd., which is a Didi Kuaidi investor.

For example, China’s Didi Kuaidi, formed from the merger of two taxi apps in February, says it has more than 80% of the ride-hailing market for private drivers and more than 90% of the taxi-hailing market in China.

Regulatory hurdles have been a major issue for Uber and local competitors as they often battle with local taxi monopolies and must make investments while operating in often unclear legal environments.

Investors like Mr. Ji are betting that the local operators, run by entrepreneurs who often have ties to local officials and are seen as national champions, can navigate those relationships better than Uber.

GrabTaxi, which recently completed a nearly $400 million fundraising round valuing it at $1.6 billion to $1.8 billion, was founded by local entrepreneur Anthony Tan, whose grandfather co-founded a company that distributed the first Japanese cars in Malaysia. Mr. Tan has said he thinks it is important for his company to cooperate with regulators and comply with local laws. Jean Liu, president of Didi Kuaidi, now valued at $15 billion, is the daughter of the founder of Chinese personal computer maker Lenovo Group Ltd.

“There’s also a lot of subtlety and nuance to meeting local customer demand, which local entrepreneurs can respond to more efficiently,” said Mr. Ji. GrabTaxi, for example, has introduced a GrabBike service in Indonesia, Thailand, and Vietnam to offer riders motorcycle taxis, which are a popular form of transport across Southeast Asia. Ola Cabs in India offers rides on three-wheeled auto-rickshaws.

Many of the investors like Japan’s SoftBank Corp. and Tiger Global Management LLC that joined GrabTaxi’s fundraising round last week are already investors in Didi Kuaidi and Ola Cabs, which is valued at $2.5 billion. They have shown a willingness to commit billions of dollars in capital to help these companies provide discounts to riders and improve their operational platforms.

China’s sovereign-wealth fund, China Investment Corp., which has $740 billion in assets, joined the latest fundraising rounds for Didi Kuaidi and GrabTaxi, adding another big backer to the companies’ shareholder rosters.

Some of the ride-hailing apps are soaking up new sources of funds at a time when Uber is also trying to raise money from Asian investors, according to people familiar with the situation. Uber began pitching to local Chinese investors on June 22 and it is trying to raise $1 billion for its China operations. UberChina has yet to announce that the funding round is closed.

For example, Didi Kuaidi said its cash reserves exceeded $3.5 billion after its latest fundraising round in July, giving it ample ammunition to battle Uber.

Still, Uber has been able to build ties with important investors in Asia that can help it on the ground. China’s top search engine, Baidu Inc., became Uber’s strategic partner in China in December with an investment and the investment arm of Indian media conglomerate Bennett Coleman & Co. participated in Uber’s latest fundraising round. Uber also raised money from a group of investors led by Beijing-based fund manager Hillhouse Capital Group in a convertible bond deal.

Warren East, the new chief executive of aero-engine maker Rolls-Royce, knows more than most about the clash between short and long-term interests in a business.

“Warren says he spent his whole time at Arm Holdings being pressed by banks and investors to sell the business in its early stages,” explains a Rolls-Royce board colleague.

Mr East — who was chief executive of Arm, the UK semiconductor designer, for 12 years — held out against these demands and the company eventually went on to dominate the global market for microchips in mobile devices.

“That is a good example of saying no, we can make more value by running this business ourselves,” the director says. “Our job at Rolls-Royce is not to allow short-term pressures to undermine the long-term value of the business.”

But that is a challenging task after four profit warnings in 18 months and calls from some investors for the engineering group — which spans land, sea and air power systems — to focus its efforts on aerospace.

Now, the emergence of a US-based activist fund as one of Rolls-Royce’s top shareholders has only heightened the pressure for a disposal of the poorly performing land and sea businesses. California-based ValueAct has indicated that, while supportive of Mr East, it will eventually push for disposals.

Mr East, however, has said he believes Rolls-Royce’s diversification strategy is “broadly correct” — potentially setting up difficult conversations later.

Many inside the company, and some investors, also appear sceptical of ValueAct’s apparent conviction that there is no need to have other businesses to counteract the 20-year cycles of Rolls-Royce’s biggest market: the passenger aircraft industry. As one board member puts it: “Risk increases massively the more pure play you are.”

But the market is not sympathetic. “It is hard to persuade investors of the merits of a strategy that is meant to bring rewards starting in the 2020s when you have had [so many] profit warnings,” says Nick Cunningham, analyst at Agency Partners.

Rolls-Royce has not always had such difficulty in convincing investors that it knew best. Under Sir John Rose, chief executive for 15 years to 2011, the group went from being a bit player in the global aero-engine market to the world’s second largest. Although there were turbulent times, such as the post 9/11 downturn, Sir John could be famously dismissive of those who did not share his long-term vision.

“Rose just pointed to the next 10 years and said the business would double in size,” says another former colleague. “He told investors that it would be a bumpy ride sometimes, but we will double in size.”

Some analysts became frustrated with what they regarded as the company’s arrogance, and many questioned the aggressive accounting policies that brought forward earnings on maintenance contracts. They could not argue with Sir John’s success, though. When he left the company four years ago, its order book stood at close to £60bn, up from £7.6bn in 1997.

Part of the difficulty in getting the long-term message across in recent years has been the loss of not only Sir John’s supreme confidence but also some other seasoned communicators.

Simon Robertson, the former Goldman Sachs banker who was chairman for eight years and Andrew Shilston, the former finance director, were able to make up for Sir John’s often peremptory handling of analysts’ questions. “I don’t think they would have got themselves into this mess,” says one long-time shareholder.

Their departure left Rolls in the hands of a team little known to the city: Ian Davis, a former head of McKinsey, became chairman; Mark Morris was promoted from treasury to finance director; and John Rishton, a non-executive director and former chief executive of Dutch retailer, Ahold, took over from Sir John.

Mr Rishton struggled from the start to win investors’ confidence, even if the shares continued to rise on the back of a growing aerospace order book.

“He didn’t come from the right background,” says one investor. “Some people never liked him. Rose was regarded as technically sound.”

But Mr Rishton also faced a confluence of events that shook confidence in the long term.

Rolls-Royce’s dominant aerospace division had pulled in record orders, but now it would have to deliver — and its industrial base was in sore need of modernising to be efficient enough to do so on time and on budget.

At the same time, Rolls-Royce’s cash position had become more volatile. After years of investment, shareholders wanted to see returns start pouring through. Instead, Mr Rishton opted to cement the diversification strategy launched by his predecessor. He spent more than £1bn in 2014 to buy Daimler out of a power systems joint venture. He also took a hit when exiting a narrow body aircraft engine partnership with Pratt & Whitney, and missed out on a boom in short-haul aircraft orders.

While these decisions were blamed on Mr Rishton, some now see them as the logical conclusion to strategic moves by Sir John much earlier: first, to counter the risks in aerospace with shorter cycle diversification; and, second, to focus on engines for the wide-body market where Rolls-Royce is set to hold 50 per cent of the installed base.

A collapse in defence orders and then in the marine engine market, as a tumbling oil price halted offshore investment, have compounded the problem.

Rolls-Royce’s profit warning in February 2014 was a watershed. Not only was it the first time Rolls-Royce had warned on profits in a decade, but it also laid bare the lack of City experience on the board. One analyst was allowed to issue a buy recommendation on the company on the eve of the warning.

Subsequent warnings — the last just a few days into Mr East’s tenure — instilled deep anxiety over whether the management knew what was happening in its different businesses. Those concerns have opened the door for an activist such as ValueAct.

Mr East now has to prove that he can address concerns over the transparency and profitability of Rolls-Royce’s civil aerospace business before he can win faith in the diversification strategy.

Costs have to be brought down if the group is to have the resources to compete in new engine technology with rivals General Electric and Pratt & Whitney, which enjoy higher margins.

Some work has already been done and margins will eventually benefit from an investment in state of the art capacity that has been dragging on returns. But more is needed. Mr East will have to set that out in the operational review due at the end of the year.

In the end, confidence in Rolls-Royce’s long-term future will return if the strategy makes sense to investors. That requires a defter handling of the City than in recent years. “It is a matter of presenting appropriate evidence,” says one investor. “If you put forward a sound case, the market will usually back it. Shareholders can be very patient for a business that delivers returns, even over a long period.”

Aberdeen -0.5% Negative FT article on money leaving emerging markets

Admiral +2% Numbers better, EPS 54p vs est 47p

Ashmore -0.5% Negative FT article on money leaving emerging markets

Carlsberg -5-7%(Probably) A big miss on EBIT and EPS. Guidance cut for FY15

Cembra +1-2% H1 bottom line 6% beat vs cons, FY guidance increased

Fagron +1% CEO talking positively on 2H

Flowtraders UNCH No's inline Expects Q2 revs to be modestly lower

Glencore +2% Net debt better, divi maintained, Capex guidance cut

Hikma +1% Numbers inline, positive Vitabiotics deal

Imperial Tob UNCH Remains ontrack to deliver FY targets

Lundbeck +5-10% Revenues 5% beat, announced a radical restructuring plan

Miners UNCH Copper +0.05%, Brent UNCH, Iron Ore UNCH, China -1.51%

Oils -0.5% DOE forecasting a much smaller draw than API showed

Raiffeisen +1-2% 2Q Net, pretax beat, keeps outlook unchanged

Roche M/P To Buy US privately held Kapa Biosystems

Sonova +0.5% Advanced Bionics gets FDA approval for Naida CI Q90, Q30

Syngenta M/P Announces planned divestment of Flowers seeds business

Swisscom M/P Q2 revs CHF2.87b est CHF2.89b, Proposes unchanged dividend

Tecan +2-3% Positive update from OCD, Tecan is a partner

Dax Future down 1,05 percent to 10802 points.

Annington 0,50% H1 Figs at upper end of range, FFO up 36%, Guid. confirmed

Sixt Leas. -1,80% Q2 Figures below our estimates

Manz 2,90% Follow up orders for automation unit, that amount to €10mn.

zooplus -2,20% Weak Margin, strong Cash Flow, Guid. Confirmed

Drillisch -0,20% Drillisch Rated New BUY at Jefferies, PT €51.

United Int.-0,80% United Internet Rated New BUY at Jefferies, PT €57

Freenet -1,00% Freenet Rated New 'Hold' at Jefferies, PT €31

Hann Rueck -2,00% Morgan Stanley cut to UNDERWEIGHT (EW)

*CARLSBERG-Q2 Sales 18.9b(18.8),PT 2.43b(2.74),Cuts FY Org Op.....-7%

*SYNGENTA-Plans divestment of flowers seeds bizz(4.6% of 14 rev)..-0.5%

*SWISSCOM-Rev 2.87b(2.89),Ebitda 1.08b(1.08),Net 433m(411.4)......-0.25%

*RAIFFEISEN-NI 204m(133),NII 862m(823),LLP 332m(345),CET1 10.7%...+2%

*SONOVA-Wins FDA approval of 2 sound processors(Naida CI Q90/30)..+0.25%

*CEMBRA-Net 69.6m(66.6),Op Inc 190.3m(189),FY EPS 4.7-4.9(4.6-8)..+1%

*ANNINGTON-FFO 264.3m(255),Div 94c(93),guidance conservative......-0.25%

*SIXT-Rev 163.8m(160),EBT 6.4m(7.3),NI 4.4m(5.6),FY Confirmed.....-0.25%

*ZOOPLUS-Q2 sales reported 22/7,PT 3.6m(2.5),Net 2.1m,FY fine.....-0.5%

GSF q2 weak numbers even after warning, cuts harvest outlook -3%

CARLB q2 numbers miss, lowers guidance, FY EBIT to decline -5%

LUN Q2 sales beat at 3.63bn v cons 3.46bn, mixed FY guidance revisions unchgd

ICA q2 solid numbers, no drama +1%

EKO q2 sales 9% weaker, EBIT misses by 19% -3%

ELUXB AHAM numbers out +6.3% in July, vs 3.8% in June +1%

* AMEC FOSTER WHEELER Korean contract win small but +ve for sentiment.......unch

* ADMIRAL H1 combined ratio 82.7%, PTP £186.1m...............................+1%

* CIRCLE OIL +ve Tunisian permit update......................................+5%

* ENQUEST guidance maintained, cost cutting going well......................unch

* GEM DIAMONDS int results slightly ahead of mkt, no changes to #s expected.unch

* GLENCORE H1 net inc $881m Vs $711 est, been v weak into event..............+1%

* HIKMA H1 update - co keeps o'look for rev growth of 6% at constant fx......-1%

* IMP TOBACCO Q3 IMS slightly light, says on track to deliver FY 15 targets..-1%

* RICARDO small acquisition of Cascade Consulting...........................unch

* ROLLS ROYCE FT says Valueact may push for break up..................unch/+0.5%

* CARLSBERG-Q2 organic net rev -3% vs est -0.1%,cuts f/cast, W Europe weak...-7%

* D ANNINGTON-Q2 solid,lfl rentals +2.7%, confirms increased FY f/cast.......+2%

* FLOW TRADERS-Q2 net trading inc -8% QoQ,value traded -17%,shs +5% y'day....-5%

* LUNDBECK-Q2 sml beat,big restructure and guidance cut by new CEO............??

* RAIFFEISEN-Q2 profit beat,CET1 rises to 10.7%,disposals process delayed....+2%

* SWISSCOM-Q2 rev in line, net beat, slightly raises FY ests on FX...........U/C

* SYNGENTA-plans seeds disposal. Not material($227m sales)...................U/C

ADMIRAL +1% H1 revenues ahead, EPS strong, low growth rates & PBT only +1%

CARLSBERG -8% Don't do profit warnings, but if they did....

ELECTROLUX +1% Strong AHAM 6 data, +11.2% YoY (WHIRLPOOL +2.5%)

ENQUEST -1% H1 sales, EBITDA & FCF light but reiterates guidance.

GLENCORE +4% H1 EBITDA light, EPS beat, W.Cap unwind 3.2bln, Net Debt better

HEINEKEN -1% Weak on read through from Europe in CARLB numbers.

HOCHSCHILD 0% Q2 EPS 0.12 v 0.11 cons, EBITDA a touch light, reit FY guidance

IMP TOBACCO -2% 9m IMS weak, volumes -3% v -2% expected and net revs miss.

LUNDBECK +3% Q2 results strong, increased guidance and restructuring.

RAFFEISEN +2% Q2 CET1 @ 10.7% v 9.9%. NI a 4% beat on NII and F&C.

SWISSCOM +2% H1 sales and EBITDA inline and raised net rev guidance a tad

The decision to allow the RMB to float has brought a host of macro sensitivities and interpretations as to its significance. If one of these considerations is restoring China’s competitiveness cyclically, there is also a key structural threat to understand which we revisit here. A weak RMB only underlines its relevance.

* Three key existing drivers of competitive risk: First, the risk of China exporting its excess capacity and further disrupting pricing – only heightened by poor export data. Second, China’s dramatic ascent of the value add curve (it has more than doubled its share of the domestic robotics market). Third, Chinese companies are seemingly comfortable to operate at consistently lower industrial returns and margins (e.g. 8% vs 16% HOLT EBITDA

margins for European autos). As we see increasing value add from China, it becomes more difficult for Western companies to play the “quality” card.

* China’s Industrie 4.0: Low margins/pricing have been doubtless part of China’s strategy to establish footprint/national champions in key segments. Should there be doubt as to its commitment to this approach, the recent “Made in China 2025” plan underlined 10 key industries of strategic focus (detailed inside), and implicit fiscal support confounds it. China intends to source 40% of key components domestically by 2020 and 70% by 2025.

* We detail the key end markets for global companies where Chinese companies reside and our judgement as to the strategic competitive risk (pages 9-10). We also examine stocks where their CFROI® track record has already been pressured and where revisions are weak. A poor returns profile now with structural risk in the future is not an appealing mix (page 8). If one industry ticks all of the above boxes, it is autos. We highlight our PEERs supply chain tool that allows investors to track the competitor dynamic of companies and also where JV and equity investments exist.

Tethys Oil, the Swedish energy company, said in its H1 earnings report that it is actively seeking acquisition targets, a company press release said.

The release said that many oil companies are being more significantly impacted by the drop in oil prices than Tethys, and the company wants to try to take advantage of the opportunity this presents.

Tethys added that it remains cautiously optimistic about its chances to conduct M&A deals.

{http://www.hankyung.com/news/app/newsview.php?aid=2015081996471}

Dow-0.19% S&P-0.26% Nasdaq-0.63% Russell-0.83%

US MArket Closed lower in low volume (700mil shares), pressure in China weighted on sentiment. Ashaky session in Europe didn't helped. Nine of ten sectors ended the day in negative territory with losses ranging from 0.01% (telecom services) and 0.7% (materials), commodity-related sector—energy (-0.4%)—ended among the laggards even as crude oil spiked 1.8% to $42.62/bbl. HD +2.6% on numbers. Urban Outfitters retreated 2.1% after below-consensus revenue and comparable store sales overshadowed a bottom-line beat while TJX spiked 6.8% after beating earnings estimates. WMT -3.4% on earnings & Guidance. US After Hours ADI +7.1%, WB +2.7%, SINA +2.0%, LZB +0.7%, CSIQ -8.1%, TEDU -6.2%, DV -5.4% following earnings/guidance...HILL +85% to be acquired by STX @$9.75/share(cash), Shanghai Composite remains in focus with a volatile morning session that saw the index plummet as much as 5% to a new 2-week low below 3,600. Investors' concerns over SOE reform and implications of the latest aggressive open market operations as a remedy for rising outflows continue to cloud sentiment. In the mean time, the Yuan fix was once again marginally increased relative to yesterday, which marks the 4th straight lift. China State Information Center also recommended that policymakers accept expanding fiscal deficit in H2 to stabilize the economy. Japan merchandise trade data that saw its widest deficit in 5 months at -¥268B V -¥53.0BE. Shipments to US and Europe were up double-digits at +18.8% and +10.0%, while China exports were up just over 4%. Results from key basic materials names down under are helping the Australia index outperform in the region. Woodside Petroleum and Arrium were particularly notable, both rising about 2% on earnings.

Nikkei -1.49% Hang Seng -0.94% Shanghai -2%

Eur$ 1.1067 JPY 124.27 CNY 6.3991 GBP 1.5670 RUB $65.76 WTI $42.31 (-0.73%) Golds 1118

S&P -0.38% EuroStoxx -0.95% DAx -1.08% SMI -0.66%

- Greece Raised to CCC From CC by Fitch

- Greatest Amount of Energy M&A Activity ‘Just Ahead’: Wells Fargo

- ECB Said to Reduce Greek ELA to EU89.7 Bln in Line With Request

- Copper Cos. Tumble as Price Falls; First Quantum Underperforms

- AOI SS : Africa Oil in $50m Equity Subscription Financing With IFC

- CARLB DC : Carlsberg Cuts 2015 Organic Oper. Profit Forecast

- CBMN SW : Cembra Money Bank Raises FY 2015 Earnings Guidance

- CPR PL : Cimpor Names Paulo Diniz CFO, Replacing Claudio Palaia

- CDR SM : Spain’s Codere Modifies Terms of Lock-Up Contract: Filing

- DAI GY : Daimler Halts Production Current Electric Smart Car: Die Zeit

- Danish Ship Finance : Danish Ship Finance Owners Split Over DK4b Takeover Bid: Borsen

- AAN GY : Deutsche Annington 1H FFO 1 EU264.3m vs EU130.3m

- El Corte Ingles : El Corte Ingles Holder Says Hamad Deal May Trigger Penalties: FT

- EKO NO : Ekornes to Cut Costs by NOK150m by End 2016 vs 2014 Cost Level

- FAGR BB : Fagron CEO Still Plans to Make Acquisitions: Financieele Dagblad

- GL FP : Paris Creates Tourist Zones for Late, Sunday Shopping: Parisien

- GLEN LN : Glencore 1H EPS, Net Beats Estimates; Cuts FY Marketing Forecast

- GS US : Goldman Sachs Gets Approval to Tap BOE for Emergency Cash: Times

- HIK LN : Hikma Signs for Rights to Sell Full Vitabiotics Range in 5 Mkts

- JEN BB : Jensen-Group Sees Higher 2015 Revenue With Order Backlog Up 4%

- LNSX GY : Sixt Leasing 1H Earnings Before Taxes Up, Confirms Outlook

- ROG VX : Roche to Buy U.S. Privately-Held Kapa Biosystems

- SBO NO : Selvaag Bolig 2Q Net Income Rises; Declares 1H Div of NOK0.7/Shr

- SCMN VX : Swisscom 2Q Net Beats Ests; Raises FY Rev., Ebitda Forecasts

- SFZN SW : Siegfried 1H Ebitda Rises 21.8% to CHF34.6M;Sees Higher Dividend

- STR AV : Strabag Confirms It’s Looking at Imtech’s German Business

- SYNN VX : Syngenta Plans Sale of Flowers Seeds Business

- UBSN VX : UBS AG Shares to Be Delisted From Swiss Exchange on Aug. 27

- ZO1 GY : Zooplus 2Q Profit EU1.15m vs EU1.27m, Confirms Forecast