Foreigners always complain of protectionism in China. They say Chinese companies want to screw them and take their money. But some Chinese firms are different. Take Dongfeng Motor (0489.HKG). The Chinese automaker is in some very successful partnerships with international firms. Sales of the cars it makes with Japan’s Nissan Motors (7201.TYO) grew 24% to 91,800 units in April from a year earlier. Sales from its joint venture with Honda Motor (HMC.NYSE, 7267.TYO) jumped 28% to 32,220 units over the same period. But the biggest boost came from the cars built with its French ally Peugeot (UG.EPA) in whom it just bought a 14% stake. Sales from that alliance rocketed 150% in April to 60,000 units and put to them pair on track to meet their 2014 sales target. Those are decent figures for struggling foreign firms. Japanese brands have been hurt by anti-Japan sentiment over a diplomatic dispute in the East China Sea while Peugeot is struggling with a depressed market in Europe; the company racked up a net loss of US$3.13 billion in 2013. This strong product pipeline gives analysts at UOB Kay Hian a positive view on earnings outlook for Dongfeng, according to a note by the investment bank. “For 2015 and beyond, the strong product pipelines … will likely sustain sales momentum.” Many of the models to be rolled out are from the firm’s foreign partnerships. That said “Japanese car sales in China could be hurt by large-scale anti-Japanese riots.” UOB has a “buy” rating on Dongfeng.
Lenovo, fingers in too pies might get you burned
Success and sacrifice are two sides of the same coin. It is a theme often repeated in odes, commencement speeches and literature. On the flipside, it is also repeated by the glib, who often graciously volunteer this piece of self-evident advice while you are mired in grueling work. So when people or companies defy that maxim, appearing to attain success without much effort, it naturally arouses a fierce envy. For Lenovo’s (0992.HKG) competitors, we could imagine that is annoyingly the case. Amid the shift to mobile, which has dealt a blow to PC manufacturers’ margins, Lenovo’s ability to move to different markets, be it servers or smartphones, means it has weathered the often changing trends in technology. Its earnings report for the fourth quarter ended March 31 said the firm is now the largest PC manufacturer by worldwide sales and the fourth-largest smartphone manufacturer, shipping a record 115 million total devices. But the company’s decision to have its finger in every profitable tech market meant it needed to make expensive, and sometimes unprofitable, acquisitions, notably with its purchase of Motorola’s (MSI.NYSE) mobile division for US$2.91 billion early this year. Lenovo followed up that purchase by buying IBM’s (IBM.NYSE) x86 server business, also this year. These acquisitions would usually put a crimp on these impressive earnings. Analysts, however, are highly optimistic of Lenovo’s record of turning struggling company divisions around. “Although the upcoming Motorola integration might bring short-term operation and financial uncertainties … we are confident in Lenovo’s ability to turnaround its business with continuing market share gains and profit growth,” Barclays analysts said in a note.
When the going gets tough, buy a penthouse
China’s property market looks dismal. Home prices in 26 of the 70 cities surveyed by the National Bureau of Statistics either stopped growing or fell month-on-month in April. Not to fear, however. There are a few opportunities for hungry property investors. China’s luxury real estate market has maintained strong momentum. Although many property developers are having trouble coming up with funds in the first half of 2014, luxury home builder Sunac China Holdings (1918.HKG) doesn’t seem short on cash. The company announced on Thursday that it would buy a 24% stake in Greentown China Holdings (3800.HKG) for US$812 million. Nearly a year ago, the two firms bought a piece of Shanghai property for US$925 million. The joint venture has reportedly been a success; it should be given that one of the primary shareholders in Sunac is married to Greentown’s chairman. The buyout has a chance of being equally harmonious. That said, Barclays Research noted that the Sunac-Greentown hookup has not fully demonstrated how it will operate. “We believe investors will likely hesitate about any bargain hunting until management proves its execution capabilities,” Barclays said in a note to investors. But by that time, however, it will be tough to buy the company on the cheap.
Chinese online retailer JD.com (JD.NASDAQ) raised US$1.78 billion in a US IPO on its debut on Thursday after pricing its shares higher than in the indicative range. The company, which is more similar to Amazon (AMZN.NASDAQ) rather than Ebay (EBAY.NASDAQ), handled purchase of more than US$20 billion in 2013 but has yet to turn a profit.
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