Due to the ongoing rectification of the medical beauty industry in China, the slowdown of economic growth, and the strict prevention and control policies of the COVID-19, the share price of this popular cosmetic application operator plummeted.
For New Oxygen International(SY.US)For investors, the takeover offer led by the company's management nearly a year ago is now like a distant dream. With the increasingly severe situation of its products and services, the stock price of this popular medical beauty service application has plummeted, and the possibility of completing the transaction at the proposed price seems to be decreasing. Therefore, when the company announced last Friday that the co founder andCEOA team led by Venus last year11When the initial acquisition offer proposed in June was officially cancelled, this news was not too surprising. At that time, the team proposed to sell each American depositary stock(ADS)5.3Purchase all outstanding shares of the company that it has not yet held at a price of US dollars. This transaction will privatize the company, and the offer price is equivalent to the latest stock price of New Oxygen at that time23%Premium. The market reaction at that time meant that investors were skeptical about whether the transaction could be completed. On the day of announcing the acquisition plan, the stock price of New Oxygen did indeed rise sharply, but closed at4.82The US dollar is much lower than the offer price. In the following months, the gap did not narrow, and like many Chinese peers listed in the United States, the stock price of New Oxygen has actually been falling freely. On Tuesday, the stock closed at0.535The US dollar, falling into the low price range - only about one tenth of the initial acquisition price, technically speaking, if the transaction price is below1USD, the company will face delisting risk. Venus' acquisition offer indicates that he believes that New Oxygen, as his own private holding company, will develop faster and may receive higher valuations if it goes public again in the future. Similar ideas often become the reason why company management leads such acquisitions, as they often have a good understanding of their operations and believe that the company has been underestimated by stock market investors with insufficient information. But in reality, life for new oxygen is not easy now. Most importantly, China is one of the largest medical beauty markets in the world, and regulatory agencies are rectifying the medical beauty market to eradicate the improper operation of illegal medical beauty institutions that are rampant. The rectification action began a few months before the Venus acquisition offer, bringing a lot of uncertainty to the business of New Oxygen. last year8At the end of the month, regulatory agencies issued a draft guideline for soliciting opinions, requiring medical beauty companies to obtain specialized permission to publish advertisements. The predicament of medical beauty companies will almost undoubtedly harm New Oxygen, which shares information about these companies on its social media like platforms and charges fees from them as the main source of income. Whether the government will treat such information as advertising has become a major issue faced by New Oxygen. The company stated in its latest annual report that this situation is "unlikely", but it also warned that the content of its platform may be considered as advertising because the definition of advertising is very vague. If regulatory authorities adopt this stance, it will have a devastating impact on the company, possibly forcing it to scale down or change the way information is shared on the platform. In other words, new oxygen may be forced to change the entire business model. gloomy prospect Even without this daunting regulatory challenge - one of the many challenges faced by Chinese technology companies over the past two years - the sharp slowdown in the Chinese economy has made life difficult for companies providing non essential services, and New Oxygen is no exception. As consumers with unstable income reduce their spending on beauty and other projects, the revenue of beauty clinics decreases and marketing expenses are controlled. China's strict epidemic prevention and control policy of COVID-19 is one of the causes of the economic downturn, and medical beauty service providers may receive a request to suspend business at any time. Moreover, even when open for business, people tend to stay away from these places due to concerns about infection. This reality is further weakening the medical beauty industry and transforming into a decrease in demand for new oxygen platforms. At the same time, New Oxygen is facing increasingly fierce competition from other similar application operators, such as the unlisted Genmei and beauty software manufacturer Meitu(1357.HK)It is one of its investors, as well as some search engines and e-commerce websites. According to the latest financial report of New Oxygen, its revenue decreased year-on-year in the second quarter32%to3.09One billion yuan, although the number of medical service institutions that pay to use its platform has actually increased. This indicates that the company's revenue from unit customers is far lower than the same period last year, and even though its customer base is expanding, everyone is taking control measures in terms of expenses. Therefore, New Oxygen recorded a net loss this quarter3,200Ten thousand yuan, reversing the profit from the same period last year5,800The situation of ten thousand yuan. The company has launched a product called“So-Young Select”Our products aim to improve the operational efficiency of medical service companies by reducing their customer acquisition costs. As healthcare providers find it increasingly difficult to increase their income, such services may be attractive, but only if they are confident that the revenue generated by these tools will exceed the cost. At least for now, it seems that New Oxygen's performance in the third quarter will not be much better than in the second quarter. The management is responsible for8When announcing the second quarter results in June, it was expected that revenue in the third quarter would decrease year-on-year28%。 Considering that the prospects for new oxygen are not optimistic, it is not difficult to understand why Venus will abandon its proposal to acquire the company. The acquisition quotation is the latest market value of the company10Times. This transaction will be a leveraged acquisition using debt, which means that in the coming years, it will only succeed if the company can significantly increase revenue, generate sufficient funds to repay the debt, and provide additional profits for the supporters of the transaction. Within two days after announcing the withdrawal of the acquisition offer, the stock price of New Oxygen fell by approximately 14%。2019yearIPOThe stock price at that time is13.8The US dollar is only a fraction of it now. When the company went public, its market value exceeded10USD100mn(72RMB100mn)Currently, only about6,000Ten thousand US dollars, based on last year's revenue, its market to sales ratio is less than 0.3 Times. In contrast, delivery giant Meituan(3690.HK)The market to sales ratio is much healthier, around4Times. Meituan also provides services similar to new oxygen applications. Even Meitu's P/E ratio is much higher, reaching1.6Times. Meitu, like New Oxygen, engages in specialized businesses and is currently in a loss making state. The current economic recession is bringing challenges to everyone, from giants like Meituan on the food chain to smaller professional companies like New Oxygen. But compared to the latter, large companies can rely on a much wider range of products and have more financial resources, making it easier to navigate through the negative development phase that New Oxygen is currently facing. Without such a safety net, the future of new oxygen looks precarious. |
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