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E-Commerce China Dangdang Inc. Message Board

  • lawstuff22 lawstuff22 Aug 20, 2013 5:46 PM Flag

    Morgan Stanley downgrade is old news from 8/16

    August 16, 2013
    Dangdang Inc.
    Improving Margins, Yet
    Expectation Largely Priced
    In, Downgrade to EW
    What's Changed
    Rating Overweight to Equal-weight
    Price Target US$6.50 to US$10.50

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    • Price Target: US$10.5 Derived from base case DCF value.
      Bull
      Case
      US$14.6
      2014e net
      loss per
      share
      US$0.11
      Strong execution in GM business and faster margin recovery:
      Sales record a CAGR of 21% over 2013-17e, driven by increasing
      customer volume (14% p.a.) and ARPU (or average spending per
      customer) expansion (4.0% p.a.). Gross margin rebounds to 23.9%
      in 2017, 50bp better than in our base case.
      Base
      Case
      US$10.5
      2014e net
      loss per
      share
      US$0.20
      Sustained volume and ARPU growth: Sales record a CAGR of
      19% over 2013-17, with customer volume and ARPU growing 13%
      p.a. and 3.0% p.a., respectively. Gross margin recovers from
      13.9% in 2012 to 23.4% in 2017.
      Bear
      Case
      US$5.8
      2014e net
      loss per
      share
      US$0.37
      Slower market share gain and GM business expansion: Sales
      register a CAGR of 18% over 2013-17, with customer volume and
      ARPU growing 13% p.a. and 2.5% p.a., respectively. Gross margin
      recovers to 22.4% in 2017, 100bp lower than in our base case.

      • 1 Reply to lawstuff22
      • We downgrade from OW to EW
         This mainly reflects rich valuation.
        Current price/12m forward sales ratio
        is ~0.8x, vs. its range of 0.3-0.6x over
        the past year.
         Dangdang is well positioned to
        capitalize on the e-commerce market
        upswing in China.
         It has captured half of all online book
        sales in China, yet has serviced only
        2-3% of the Chinese online
        population, implying ample upside
        potential.
        Key Value Drivers
         Expanding customer volume via
        capturing greater share of China’s
        e-commerce market;
         Higher ARPU expansion as repeat
        customers increase spending;
         Growth beyond book distribution
        through general merchandise service.
        Potential Catalysts
         Margins for its general merchandise
        service may improve, helped by better
        product mix and increasing scale.
        Key Downside Risks
         Thin margin due to its retail nature;
         Intensifying competition on multiple
        fronts, e.g., Amazon and 360buy.
         General merchandise initiatives may
        stretch the company’s resources and
        lead to brand dilution.

 
DANG
6.00+0.040(+0.67%)Jun 29 4:02 PMEDT