The past strategic contraction has left more room for imagination for the expansion of Fast Dog's business after the listing and the consequent valuation increase.
On March 3, the Hong Kong stock market will usher in a new Internet company - Fast Dog Taxi. As one of the leading companies in the same city freight, will fast dog taxi be a good target?
The Chinese edition of Barron's magazine believes that although fast dog taxi is not the largest in terms of current market share, after the listing, the valuation of fast dog taxi may be supported from three aspects. They are the golden track of same-city freight, the logistics ecology of fast dog taxi, and the restorative return of valuation.
The overall situation of the golden track is undecided, where is the growth potential of fast dog taxi?
In the valuation logic of growth stocks, high growth is the basis for obtaining valuation increases. The growth of a company depends on both its own growth rate and the growth space of its industry and the position of the company in the industry.
According to Frost & Sullivan, the penetration rate of online logistics platforms in Asia was only 0.2% in 2016, compared with 0.3% in China.
However, in the following years, there was a rapid growth in same-city freight. Based on total transactions, from 2016 to 2020, the compound annual growth rate of the same-city logistics market in Asia was 7.8%, compared with 11.5% in China. From 2021 to 2025, these two figures will remain at 9.4% and 8%. At that time, the penetration rate of online logistics platforms will reach 14.3% and 18.8% respectively.
From another perspective, we can see the potential of same-city logistics.
Capital is always the most sensitive, in the same city freight market, there is no shortage of well-known funds into the game, behind the lala there are Hillhouse Capital, Sequoia Capital, etc., behind the listing of Manbang behind Sequoia China, Yunfeng Fund, Tiger Global Fund, etc., behind the fast dog taxi is Ali's Taobao China, Cainiao, AHKEF (Alibaba's investment fund), as well as Swiss Bank, BOCOM International Asset Management Company and so on.
Fast Dog Taxi was an early participant in same-city freight.
The predecessor of Fast Dog Taxi was 58 Express, which was established in the mainland in 2014, merged with GOGOVAN, which was established in Hong Kong in 2017, and was renamed Fast Dog Taxi in 2018. At present, Kuaigou operates in mainland China and other parts of Asia under the two brands of Kuaigou Taxi and GOGOX (formerly known as GOGOVAN), with the latter's business concentrated in Hong Kong, Singapore, South Korea and India.
By the end of September 2021, Fast Dog Taxi had already operated in more than 340 cities in five countries and regions in Asia, with 26.5 million registered users and 4.9 million registered drivers.
Unlike Lalala, an important feature of fast dog taxi is the coverage of overseas markets. According to third-party firm Frost & Sullivan, Chinese mainland and Hong Kong together account for about 68% of asia's online same-city logistics market based on transaction volume in 2020. In other words, in the process of upgrading of offline logistics to online logistics, Chinese mainland and Hong Kong are in front of the Asian market, which also shows that the potential of other Asian markets will be greater in the future. As mentioned, from 2021 to 2025, the compound annual growth rate of the same-city logistics market in the Asian market will be higher than that of the Chinese market.
In the Chinese mainland market, there is also considerable room for fast dog taxis to play in the field of planned cars. At present, the planned car business in the Chinese mainland market accounts for only 5% of revenue, while overseas accounts for 30%. An industry insider said that the penetration of the Internet freight industry began with relatively easy real-time freight, and as the industry matured, it would enter the field of planned cars. Therefore, the planned car field will also be the future growth point of fast dog taxi.
In the revenue structure of fast dog taxi, Chinese mainland and overseas markets account for almost half each, and the proportion of overseas markets has been increasing since the past few years. In 2018, 2019, 2020 and the first nine months of 2021, the overseas revenue of Fast Dog Taxi accounted for 26.5%, 35.4%, 47.1% and 49.2% of the total revenue, respectively.
Suppose Frost & Sullivan's forecast is accurate for the penetration rate of same-city logistics. Even according to the current constant proportion of market share, after the market penetration rate increases by 5-6 times respectively, the revenue of fast dog taxi will increase accordingly in 2025.
Of course, as the industry develops, the market share of industry participants will definitely change.
According to the calculation of transaction volume, at present, the market share of Chinese mainland the logistics market in the same city is very concentrated, and the five major leaders account for 67.5% of the market share.
However, this market is far from the time when the big picture has been decided.
From the format itself, the existing brands have not yet occupied the minds of consumers, and new competitors are still entering the game. In April 2020, Didi invested 100 million yuan to establish Didi Freight, officially entering the same city freight track.
Although the business models of same-city freight and same-city passenger transport are similar, there are industry differences between the two. One of them is that online same-city passenger transport is closer to standardized pricing, which is basically based on the distance from A location to B location, but freight is different, and each piece of cargo has different sizes and locations, which is difficult to form standardized pricing and is not easy to form monopoly concentration.
From the perspective of external policy changes, on the one hand, as a platform company, the participants of same-city freight are inevitably affected by the anti-monopoly storm of the Internet in the past two years, and companies with high market share are more vulnerable to impact. On the other hand, Chinese regulators are strengthening supervision of same-city logistics, and companies with poor qualifications will be eliminated.
According to this analysis, fast dog taxi may benefit from these two policy changes. Fast dog taxi will not only grow with the development of the overall industry, but also grow faster than the industry average due to the expansion of market share.
Moats don't rely on technology to burn money: catch drivers and keep customers
Fast Dog Taxi defines its mission as "using technology to make same-city logistics simpler."
A successful platform should grow in a technological way, taking into account the interests of all stakeholders. Burning money subsidies and quickly occupying the market are the consistent ways of Internet companies. For example, at the beginning of Didi Freight's entry, it not only waived the service fee of the new driver to join the platform, but also gave a large number of subsidies, which made Didi Freight's orders soar at the beginning. The practice of Didi Freight has once again launched a price war for freight in the same city, and even the leading cargo Lala has to participate in the war again.
But occupying the market by burning money may have worked in the past market environment, but in the current market environment, this logic may not work, because after the market declines in the valuation center of platform companies, the financing environment does not allow such burning money, and the market share obtained by burning money may not be so reliable.
Fast Dog Taxi realized this very early.
In 2018, Fast Dog Taxi changed the previously adopted subsidies, coupons and other new ways to promote vitality, and instead carried out marketing activities through word-of-mouth recommendations, rewards to users, social media and app store advertising, search engines and keyword searches.
At the same time, Fast Dog Taxi pays more attention to its own operational efficiency and establishes its own moat. This slogan is implemented at the operational level to increase customer loyalty.
Customers in the freight industry include both truck drivers and shippers. The loyalty of truck drivers depends on the stability and predictability of their revenues, and the loyalty of shippers depends on reliable cargo transportation services.
Here we need to explain the business structure of Fast Dog Taxi.
The business of Fast Dog Taxi includes three parts: platform service, enterprise service and value-added service. The simplest understanding of platform services is similar to the freight mode of Didi Chauffeur, where the shipper places an order on demand and the truck driver takes the order and completes it. Enterprise services, generally planned car customers, generally for enterprise customers with recurring logistics needs, including supermarkets, restaurants, building materials suppliers, community group buying platforms, e-commerce platforms and government agencies. As of the end of September 2021, Fast Dog has provided enterprise services to more than 37,000 small and medium-sized enterprises and large enterprises. Value-added services are mainly provided for drivers, including locating gas stations and vehicle maintenance centers, fuel cards and other services, and charging commissions to suppliers.
In terms of revenue structure, corporate services account for half of the company's revenue, but this is mainly due to accounting standards. Unlike platform services, which are only included in the commission part, corporate services include all the total transaction amount in revenue, and then calculate the amount paid to the driver as a cost. In accordance with the UNI ACCOUNTING Standards, corporate services account for 5% of revenue in Chinese mainland business and 30% overseas. In addition, value-added services account for a very low share of revenue and are ignored here.
Therefore, the main discussion here is the platform service of fast dog taxi.
In 2020, the total transaction volume generated on the fast dog taxi platform was 2.7 billion yuan, which is about 27.1 million orders from 3.2 million shippers.
First of all, from the driver's point of view, like Didi Chauffeur, the truck driver is not a fast dog taxi employee, the management is difficult, and the driver's stickiness is low. They can always go to other competitor platforms and even take orders on both platforms at the same time.
How to solve this problem?
According to the operational logic of fast dog taxi, if most of a driver's income comes from fast dog taxi, naturally his viscosity with fast dog taxi will increase, and the "management" of the platform for the driver is effective in order to serve customers well. It can be simply summarized as saying that the fast dog taxi takes care of the driver, and the driver can take care of the customer.
In order to achieve the goal of increasing the income of drivers, Fast Dog Taxi has taken several measures.
From the perspective of business philosophy, unlike some other industry participants, Fast Dog Taxi does not impose membership fees and franchise fees on new drivers, and the platform income is mainly the difference between the amount of orders paid by customers and the amount paid by the platform to drivers, or can be called commissions. The difference between membership and commission is whether the platform's revenue comes from drivers or customers. The vast majority of fast dog taxi income comes from the latter.
From a technical point of view, Fast Dog Taxi hopes to release control capacity and increase transportation supply without investing more cars on the road through scientific and technological means, such as demand forecasting, intelligent dispatch, automatic order pricing, optimized route recommendation, digital driver evaluation and wind direction management, etc., on the one hand, to release control capacity and increase transportation supply without investing more cars on the road, thereby minimizing empty travel, energy use, and carbon emissions. On the other hand, improve customer satisfaction.
To this end, Fast Dog Taxi attaches great importance to the research and development of science and technology. As of September 30, 2021, there are 112 people in the R&D team of Fast Dog Taxi, accounting for 10.1% of all employees, and has obtained 13 patents and 20 software copyrights.
With technology, Fast Dog Taxi can match drivers within an average of 11 seconds for shippers to place orders, and at the same time can track demand and order volume, predict the number of drivers who have the ability or willingness to take orders, and if there is a shortage, they can provide reward coordination. At the same time, route optimization technology can also help drivers plan the best driving route.
In 2020, Kuaigou Taxi was also rated as a high-tech enterprise by the relevant departments of Tianjin Municipality, and was selected by the Ministry of Industry and Information Technology to participate in the pilot demonstration project of big data industry development.
At the same time, Fast Dog Taxi has made a major adjustment in the business model, changing the past driver rush system to a dispatch system, and also setting up a high-quality driver system, so that high-quality drivers can get more and more predictable order quantities.
Another difference between same-city freight and same-city passenger transportation is that the golden quality point of passenger transportation lies in the waiting time of customers, so it requires a very large supply density. Freight has a much higher tolerance for time, so it is enough to ensure a certain transportation density in a city.
As of September 30, 2021, the average monthly order fulfilled by quality drivers of Fast Dog Taxi is at least 1.5 times that of other drivers. And since the launch of the Quality Driver Program in November 2020, the proportion of Chinese mainland quality drivers completing orders has increased from 3.7% at the time to 45% in September 2021.
Customer satisfaction depends mainly on the availability of reliable freight services.
According to Frost & Sullivan's report, among the online same-city logistics platforms in Asia, fast dog taxi user satisfaction is at the forefront. It can be said that fast dog taxi has established a moat in the logistics industry with driver stickiness and freight stability. Some market participants said that the current cash-burning strategy of some same-city freight participants will be difficult to work after about a year. At that time, the layout of the fast dog taxi in the early years will show its advantages.
After the tide recedes, the advantage of who can swim will be revealed. The value of fast dog taxi in the capital market will also be recognized by the market.
Value depressions expect reversals, and business space leaves imagination for valuations
Objectively speaking, it is not a good time for Fast Dog Taxi to land on the Hong Kong stock market at this time, and it can be said that it is listed against the trend.
When Fast Dog Taxi was listed, when the valuation logic of the capital market for platform companies was reversed, the operating ecology of platform companies also underwent tremendous changes.
In the past, there was a word in the Internet industry called "winner-take-all", which simply means that the leading companies in the industry will use their qualifications to raise as much money as possible in the market, and then use this money to expand rapidly, occupy the market, and even form a monopoly to obtain the pricing power of the industry. The model is to trade profit for scale. In this model, the market looks at indicators such as active users and new customer growth, rather than whether the company is making money.
Today, this situation has changed dramatically, especially as the Internet has become the focus of anti-monopoly law enforcement, and the monopoly and pricing power of leading companies have been weakened. The valuation logic of the capital market for platform companies has also changed, and the valuation center of platform companies has dropped significantly.
This can lead to difficulties for companies that previously achieved higher valuations in the primary market to obtain satisfactory prices in the secondary market.
According to public information, Lalala has raised 8 financings since 2015 and has set a record of raising $2 billion in one month. It is currently valued at $15 billion.
The latest unproven news is that manbang, whose market share of the same city freight market ranks after fast dog taxi, is planning to return to Hong Kong for a second listing, and submits a listing application as soon as this month, which is expected to raise about $1 billion.
In contrast, Fast Dog Taxi only raised 2 rounds of financing before the Pre-IPO round of financing. The financing plan for the listing of Fast Dog Taxi is only about $300 million. For companies with a large amount of financing in the early stage, there will be greater burdens when going public, because early investors need to liquidate, and if the pricing is not high enough to satisfy the early investors, listing will be difficult.
In June 2021, there were rumors that Lalala had submitted an IPO application to the United States in a confidential manner, but the news was subsequently denied by Lalala, and then there was news that Lala was considering transferring her listing plan from the United States to Hong Kong. So far, there is still no news of the listing of lara.
The low financing amount before fast dog taxi will leave more flexibility in pricing during the listing process. The low issue price will also leave more upside for the future stock price performance of Fast Dog Taxi.
At the same time, it is well known that the current Hong Kong market is a global valuation depression, especially internet companies have encountered strong headwinds in the past year. At present, most views are optimistic that the Hong Kong stock market will return to the average in 2022, and the stock prices of Internet companies are also expected to reverse.
After the completion of this listing, fast dog taxi may also accelerate market expansion.
In fact, the market strategy of Fast Dog Taxi in the past few years has shrunk somewhat, and it has not blindly joined the subsidy war to obtain short-term market expansion. This can be seen in the sales and marketing expenses of Fast Dog. In 2018, the sales and marketing expenses of Fast Dog Circle were 524 million yuan, 296 million yuan and 195 million yuan in 2019 and 2020, and 231 million yuan in the first nine months of 2021, a sharp decline compared with 2018.
After the listing is completed, Fast Dog Taxi can use this financing to expand its business. In the prospectus, Fast Dog Taxi said that in the Chinese mainland, Fast Dog Taxi has developed a highly replicable expansion model and achieved a successful track record. Whenever a new city is opened, local salespeople are deployed to quickly establish a local user network.
The past strategic contraction has left more room for imagination for the expansion of fast dog taxi's business after its listing and the consequent valuation increase.
In summary, the Chinese edition of Barron's Weekly believes that although Fast Dog Taxi is not currently the first place in the industry, the trillion-level golden track of the same city freight is still undecided, which provides it with broad growth prospects, and the technology-based logistics ecology operated by Fast Dog Taxi for many years provides a competitive moat, and the value depression where the Hong Kong market and Hong Kong stock Internet companies are currently located, as well as the space for expansion brought about by the previous business contraction of Fast Dog Taxi, may become the catalyst for the restorative return of fast dog taxi valuation.
Wen | Xia Muyuan
Edited by Leo |
(This article is for your informational purposes only and does not constitute the provision or reliance of investment, accounting, legal or tax advice.) ）
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