2 Chinese IPOs to Add to Your Watch List

2020 has been a very volatile year for investors. After hitting a bottom in March, the financial markets roared back to trade above their February peaks, prompting a flurry of companies to go public to benefit from an improvement in market valuation…

It can be difficult for investors to keep track of so many IPOs. Thankfully, you only need a handful of new ideas every year to make good returns from the stock market. Here are two Chinese IPOs that should make it onto your watch list.

1. KE Holdings

KE Holdings Inc. (NYSE:BEKE) is one of the biggest Chinese technology companies that most investors have never heard of.

Also known as Beike, KE Holdings is the owner of two leading businesses: Lianjia and Beike. Lianjia is a leading real estate brokerage in China that helps homeowners rent or sell their properties, and also helps customers find a house to buy. Beike is a real estate platform that facilitates housing transactions and services — think of it as the Zillow of China. It matches brokerages (such as Lianjia) and homeowners to customers.

Beike debuted on the New York Stock Exchange on Aug. 13, and raised $2.12 billion after selling 106 million American depositary shares (ADS) at $20 per share. The stock opened at $35 and was at about $71 as of Oct. 27, giving it a market valuation of about $80 billion. Investors are excited about the company, and for good reason.

To start with, Beike is the largest platform of its kind, having facilitated a gross transaction value (GTV) — including home sales, home rentals, and other related services — of RMB 2.1 trillion ($301 billion) in 2019, giving it a market share of 20% in China. As far as GTV is concerned, Beike is already the second-largest commerce platform in China, behind only e-commerce giant Alibaba, according to information the company provided.

Perhaps more important is that over time, Beike will benefit from the self-reinforcing cycle of a growing number of customers, agents, and property listings. Customers naturally go to the platform with the highest number of property listings, while homeowners and agents understandably prefer to list their properties on the platform with the most customers. Hence, there’s a good chance that Beike can grow its business for the foreseeable future by riding not only on industry growth but also increasing its market share within the industry. Its recent financial performance reflects such growth potential: Between 2017 and 2019, revenue improved 80% to $6.5 billion, GTV more than doubled, and the number of agents on its platform almost tripled to 358,000.

Still, KE Holdings remains unprofitable, with net losses widening from RMB 538 million in 2017 to RMB 2.18 billion in 2019. As it continues to invest in its business, there’s a good chance that it will remain in the red in the near future.

With a market cap of $80 billion, the company trades at more than 12 times 2019 sales. Though it’s not the most expensive company out there — some recent IPOs, like Snowflaketrade at more than 200 times sales — it is by no means cheap. For this reason, it’s best to keep the company on your watch list and wait for a better entry point.

2. Miniso Group

Miniso Group Holding Limited (NYSE:MNSO) is a China-based global retailer focusing on selling “aesthetically pleasing, high-quality and affordable lifestyle products.” It offers a wide range of products (about 8,000) across 11 major categories, including home decor, textiles, cosmetics, small electronics, and personal care. Its products are sold primarily through its network of more than 4,200 MINISO stores — 2,500 in China and the remainder across 80 other countries.

Since opening its first store in China in 2013, Miniso has…

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