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mid-cap

Three Intriguing Speculative Bets – ATHM, MOMO, USX

Jan 11, 2022 | Team Kalkine
Three Intriguing Speculative Bets – ATHM, MOMO, USX

Autohome Inc.

ATHM Details

Autohome Inc. (NYSE: ATHM) is a Chinese automotive online platform that provides buyers, manufacturers, and dealers with interactive material and tools. Its operating segments are 1) Media Services, which offers targeted-marketing solutions for brand and sales promotion; 2) Leads Generation Services, which enables dealers to create their online stores, list pricing and promotional information, place advertisements, and manage customer relationships; and 3) Online Marketplace & Others, which provides facilitation services and other platform-based services for new and used car transactions. As of January 10, 2022, it had 127.35 million American Depositary Shares (ADS) listed and outstanding (each ADS representing four Class A ordinary shares). 

Latest News:

  • Share Repurchase Program: On November 18, 2021, ATHM announced a share repurchase program in which the company will buy up to USD 200 million in American depositary shares (ADS) over the next twelve months. From time to time, the company's proposed repurchases may be made on the open market at current market prices. It needs to make repurchases with its existing cash balance.

Q3FY21 Results:

  • Decrease in Topline: ATHM reported a YoY decline of 23.83% in total revenue to RMB 1.76 billion in Q3FY21 (ended September 30, 2021) from RMB 32 billion in Q3FY20, due to a 53.19% YoY reduction in revenue from the Media services segment.
  • Contraction in Profitability: Net income (attributable to common shareholders) for Q3FY21 was RMB 511.04 million vs. RMB 846.67 million in Q3FY20.
  • Strong Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of RMB 19.18 billion and no outstanding debt.

Risks:

  • Voting Concentration Risk: Yun Chen Capital Caymen, a subsidiary of Ping An Group, owned 49.0% of ATHM's common shares as of December 31, 2020, providing significant control over its activities and limiting the capacity of other shareholders to influence corporate decisions.
  • Regulatory and Political Risk: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.