Global Sources: Closing the kimono?

It is just some idle speculation on our part, but we are wondering if Global Sources is mulling privatising the company – perhaps in the long-term. Global Sources has completed two tender offers in the past 20 months. The most recent one in July resulted in the company buying back some 11 million shares at US$9.00. In November 2008, the company purchased 6.25 million shares from investors at US$8.00 per share. That is a purchase of 17.3 million shares at a cost of US$150 million.

Depending on the source, the figures vary regarding the number of GSOL shares held by insiders and by institutions, but it seems that the NASDAQ-listed company has 44.65 million shares outstanding. Of those, 65.01% are held by insiders and another 32.6% are held by institutions. That leaves 2.39% as free float which is typically defined as the shares not held by insiders and large (usually institutional) shareholders. Depending on the source, the free float figure range from 2+% to about 7.5%. So that translates into a free float of anywhere from 1.1 million shares to about 3.4 million shares.

Companies pursue buybacks and tender offers for a variety of reasons and it does not necessarily indicate a path to privatising, but Global Sources really hasn’t benefited much from its listing and it takes a considerable amount of time and resources to remain a NASDAQ-listed company.

Ten years ago, Global Sources listed on NASDAQ through a reverse listing – raising no capital in the process. The company generally has no need to use the listing to raise capital, it has no long-term debt, trades at a lower valuation compared to its peers and has not needed to use the shares for any significant M&A activity.

As a result, it seems a fair question to ask why the company needs to be listed at all. If Merle Hinrichs ever decided to sell the company (improbable at best) he might do better to close the kimono.

Alibaba’s latest acquisition heightens focus on U.S. market

Alibaba.com has acquired Auctiva, a U.S.-based auction management software vendor which has worked closely with eBay in the past. Auctiva provides a variety of tools which allow users to post, market and manage their online auction listings.

This acquisition follows Alibaba’s purchase of Vendio, another U.S. firm, in June. Vendio also provides online selling tools to small- and medium-sized enterprises (SMEs). Alibaba stated that the Vendio and Auctiva deals are expected to bring 250,000 potential new customers to the company.The deal is part of Alibaba’s AliExpress initiative - a wholesale e-commerce platform which targets smaller orders.

This deal once again reinforces the fact that Alibaba and Global Sources are competing less and less as differing corporate strategies leave the two firms with shrinking overlap. Global Sources is focused on big buyer sourcing and Alibaba is (in their own words) building an online ecosystem designed to serve SMEs.

With its increasing U.S.-focus and portfolio of online selling platforms (Alibaba.com, Taobao, Alipay, Vendio and Auctiva) Alibaba looks like a far a greater threat eBay than to Global Sources. For Hong Kong-based Global Sources, the biggest ongoing challenge stemming from Alibaba will be to effectively explain to its potential clients (primarily Asian manufacturers) the reason for the premium price placed on marketing on Global Sources’ platform vs. Alibaba.com.

Global Sources Q2 revenues up 8%

Global Sources just released its Q2 results. Revenues in the second quarter were up 8% compared to Q2 2009 and the company’s chairman, Merle Hinrichs expects revenues to grow 13%-15% in the second half of 2010. Second quarter revenues were US$58.4 million vs. US$54.2 million in 2009.

Online revenues were mostly flat (US$22.4 million vs. US$22.1 million last year). Exhibition related revenues were US$27.4 million in the quarter - up from US$24 million.

GAAP net income was US$7.3 million - a 43% rise over the US$5.1 million recorded in 2009.

First half revenues were US$92.4 million, a modest increase over the US$89 million in the first half of 2009. First half net income jumped from US$6.3 million to US$9.8 million.

The company expects full year 2010 revenues to be approximately US$190 million.

Global Sources’ recently completed a US$100 million tender offer buying back some 11 million shares at US$9.00. The NASDAQ-listed shares closed at US$7.41 yesterday. Cash and cash equivalents were US$174 million at the end of Q2, but US$100 million of that figure has subsequently been returned to shareholders through the tender offer.

Hong Kong-listed Alibaba.com announced its Q2 results last week with an astonishing 49% increase in revenues (US$201 million) and a 46% increase in net income (US$53 million).

Alibaba forecasts drop in Chinese export growth

In the midst of a week-long tour of the U.K., Alibaba.com CEO David Wei has made some interesting statements. The online B2B giant is forecasting a significant slowdown of China’s export growth in the second half of this year. With some 47 million registered users Alibaba.com is actually in quite a strong position to monitor the demand for products from China. The good news is that despite a significant forecast drop, the company still expects double digit export growth in 2010.

“Chief Executive David Wei said international inquiries were down for the Chinese manufacturers using Alibaba and he expected export growth to fall from 30% to 10% by the end of this year.”

Wei also revealed that Alibaba shares its data with the Chinese government which is not surprising, but interesting to see this fact stated so explicitly:

“Alibaba monitors the transactions taking place among its business users and sends monthly reports to the Chinese government about international demand for Chinese products.

Alibaba.com as 47 million registered users - of which 12 million are based outside of China. Its online payment platform, Alipay, has 330 million registered users. Monitoring activity on those two platforms alone would give Alibaba solid insights into the state of the Chinese export machine.

No doubt Beijing will soon be asking Alibaba what should be done about the yuan revaluation.

Global Sources goes to Miami

Global Sources has quietly posted, without any press releases, a new set of exhibitions in Miami on its website.

The exhibition will cover a wide range of product categories including: gifts & premiums, home products, fashion accessories, garments & textiles, and baby & children’s products.

The dates listed for these new China Sourcing Fairs are 11-13 July 2011 at the Miami Beach Convention Centre - although the exhibition is not yet listed on the MBCC’s website. The venue has about 45,000 sqm of exhibition space.

This would be Global Sources’ first China Sourcing Fair held in the U.S. In the past year, Global Sources has announced new editions of these exhibitions in Singapore and Johannesburg.

Reed Exhibitions on the block… maybe

The Sunday Times is reporting that at least one private equity group is sniffing around Reed Exhibitions (RX)- owned by U.K.-listed Reed Elsevier (RE). The company’s CEO Erik Engstrom claims that RE is just not interested, but with Reed Elsevier sitting on a £3.9 billion mountain of debt, it must be tempting to see what the market would offer.

According to The Sunday Times, Texas-based private equity firm, TPG, is interested and has valued RX at £1.5 billion. With RX’s underlying profit of £150 million, that would seem a reasonable valuation. RX hosts some 470 events annually and employs over 2,700. In 2008, RX generated revenues of £707 million - about 13% of RE’s £5.33 billion total revenues.

RE’s half year results are due to be released on 29th July. Weak results just might push RE’s management to think a little more seriously about a potential cash influx of £1.5 billion.

Computex rolls on

Computex Taipei wrapped up this past weekend and posted a 20% increase in visitors according the Taiwan External Trade Development Council (TAITRA). 120,000 visitors passed through the gates including over 35,000 international buyers. The top five sources of overseas visitors were the U.S., Japan, China, Hong Kong and South Korea. TAITRA also reported that buyers from emerging markets also increased significantly - especially visitors from Russia, India and Brazil.

The Economist recently argued that Computex is now the most important IT exhibition in the world, although Germany’s CeBIT is still the largest. The Economist noted that 50% of all chips, 70% of computer displays and 90% of all portable computers are made in Taiwan.

Now in its 30th year, Computex grew its visitors by 20% and its total booth number by 8%. The mammoth exhibition featured nearly 4,900 booths this year hosted at multiple venues including: Nangang Exhibition Hall, Taipei International Convention Centre (TICC), Taipei World Trade Centre (TWTC) Halls 1 and 3.

TAITRA is already clamouring for more space and Computex is showing now sign of slowing down. The event’s growth prospects continue to look strong as better ties between Taiwan and mainland China are rapidly pushing up the number of exhibitors and visitors from China.

Valuing Yahoo’s stake in Alibaba

MarketWatch asks an interesting question with no easy answer. How much is Yahoo’s stake in the Alibaba Group worth?

The easiest piece is of the puzzle is Alibaba.com. Yahoo still holds a 29% stake in Alibaba.com which is worth about US$2.9 billion (at a recent share price of HK$15.30).

The other businesses are much harder to value. Alipay reportedly holds a 75% market share in China, with 300 million registered users - compared to Paypal’s 184 million accounts. Alipay has a reported daily transaction value of US$176 million.

Taobao has 190 million registered users (vs. eBay’s 90 million active users) and goods worth US$29 billion traded on the platform in 2009. Ebay recorded US$60 billion in goods sold in 2009. Taobao’s revenues are not known, but thought to be in the US$300 million range.

Citigroup analyst, Mark Mahaney estimates that Yahoo’s stake could be worth US$13 billion in off-balance sheet value. Yahoo is currently valued at about US$21.5 billion. One way we could find out the value of that 40% is through a sale. At a recent shareholder meeting Alibaba’s management said that they were ready and willing to buy back Yahoo’s stake, but don’t expect to see that announcement anytime soon. Yahoo will likely hold on for as long as they can as Alibaba’s growth prospects are far better than theirs.

Unleashing the lawyers on the… lawyers

The opening of any venue inevitably features some teething problems. That is why it is surprising that the Marina Bay Sands chose to host a lawyer’s association earlier this month! It will come as a shock to no one that this one has ended up in court.

The organiser, the Inter-Pacific Bar Association (IPBA), claims that rooms were unfinished, air conditioning malfunctioned, bathroom fixtures were not working and that there was a power failure during the keynote address.

No doubt, Sheldon Adelson, the controlling shareholder of the Las Vegas Sands Corp., has a few lawyers of his own on retainer. The Sands claims that the event was a success and that the overwhelming majority of delegates had no complaints.

Marina Bay Sands is seeking US$214,000 from IPBA and has filed suit in the Singapore High Court. IPBA has stated, “Now that we have been dragged to court we will defend the claim and issue a counterclaim as well.”

This one could drag on for awhile.

Global Sources to buy back shares at $9

Global Sources released first quarter results today. Revenues were US$33.9 million - down 2.6% compared with Q1 2009. The online and exhibitions businesses held steady, but print revenues fell from US$7.5 million last year to US$6.5 million in the recent quarter. GAAP net income increased to US$2.6 million - up from US$1.2 million in Q1 2009.

More interestingly, the company announced plans for a cash tender offer for up to US$60 million in outstanding common shares at US$9.00. That represents a 32% premium over yesterday’s closing price of US$6.83. The company could end up buying back as many as 6.67 million common shares or close to 15% of outstanding shares.

Stay tuned to see how quickly the NASDAQ-listed shares move tonight.