China online car sales platform Yixin seeks up to US$870m in Hong Kong share offer

The IPO by the Tencent-backed firm could be the third-largest by an internet business in the city this year

PUBLISHED : Monday, 06 November, 2017, 6:53pm
UPDATED : Tuesday, 14 November, 2017, 5:05pm

Yixin Group, China’s largest online car retailing platform, opened its initial public share offering in Hong Kong on Monday, seeking to raise as much as HK$6.77 billion (US$870 million) in what could be the third-largest internet business IPO in the city this year.

The firm, backed by Chinese internet giant Tencent, plans to issue 879 million shares in the global offering at an expected range of HK$6.6 to HK$7.7 each, with 10 per cent of the shares open for public subscription in Hong Kong from Monday to Thursday, according to its prospectus.

Yixin, established in 2014, expects to start trading on the Hong Kong stock exchange on November 16.

The firm’s largest shareholder, online car marketplace Bitauto, has a 51.6 per cent stake while Tencent currently holds 24.3 per cent and e-commerce platform and internet search firm Baidu own 12.7 per cent and 3.5 per cent respectively.

“The timing [for Yixin’s public offering] is good, as Tencent unit China Literature will announce its IPO subscription results tomorrow and that will unfreeze investor capital, possibly releasing a large amount of liquidity into the market,” said Alvin Cheung, a director at Prudential.

Measured by the volume and the value of car retail transactions, Yixin was mainland China’s largest online car retail transaction platform in 2016, with a market share of 19 per cent, according to a report by market research firm Frost & Sullivan.

In 2016, the company recorded more than 260,000 car and car-related retail transactions online, with an estimated aggregate value reaching over 26 billion yuan (US$4 billion).

In the first half of 2017, the volume of total retail transactions grew 88 per cent year on year to 160,000, while the aggregate value increased 94 per cent to 16 billion yuan.

Yixin had revenues of 1.55 billion yuan in the first half, up 240 per cent year on year. Adjusted net profit reached 261 million yuan, a nearly eightfold increase from the same period last year.

Yixin derives most of its revenue from two business lines: a platform for car transactions by consumers and for car loans offered by financing partners to consumers, as well as from its own car finance and leasing business.

“Yixin will focus on developing its business in mainland China at the moment,” said Andy Zhang Xuan, chief executive officer of the company, noting that the country’s car financing market still has a relatively lower penetration rate versus developed economies.

Zhang said the transaction platform business is growing at a faster pace, although the financing business currently contributes more to total revenues.

He added that Tencent and have been strategic shareholders since 2015 and will continue to work with Yixin after the IPO.

Yixin will use 30 per cent of the IPO proceeds to expand geographically its partnerships with car dealers, 20 per cent to enhance research and technology capabilities, another 20 per cent to support growth of the financing business and 20 per cent for potential future acquisitions. The remainder will be used as working capital and for other general corporate purposes.

Citi and Credit Suisse are joint sponsors of the share offering.

The biggest online IPO in Hong Kong so far this year was ZhongAn Online Property & Casualty Insurance’s HK$12 billion offer. The company started trading in September. Currently the second biggest is by China Literature, the country’s largest online publishing and e-book website, which could be worth up to HK$8.3 billion. It expects to start trading on the Hong Kong stock exchange on Wednesday.

Additional reporting by Karen Yeung