The hedge fund and private-equity firm, which was founded by a protege of billionaire investor Julian Robertson, held a 14.9 percent stake in Beijing-based Bitauto as of Sept. 12 after owning no shares as of June 30, regulatory filings show. The position makes Tiger Global the largest holder of the company’s U.S.-traded shares.
Scott Shleifer, the partner at New York-based Tiger Global responsible for the investment, is pouring money into a company that has managed to tap the
soaring purchasing power of China’s burgeoning middle class. Monthly auto sales have more than tripled since 2008 to 1.47 million units in August, according to the China Association of Automobile Manufacturers. The gamble is that there’s more room for gains after a rally that made Bitauto the best performer this year on Bloomberg’s index of the biggest U.S.-listed Chinese stocks.
“We have a well-respected fund making a significant investment,” Jim Oberweis, president of Oberweis Asset Management, which also holds Bitauto shares, said by phone from Lisle, Illinois yesterday. “They probably look at the market and the opportunity for growth and say this is a pretty good market. It’s a good business and the valuation makes sense. How much the stock’s risen isn’t relevant to me.”
Julian Robertson, co-founder and chairman of Tiger Management LLC.
Spending Power
Shleifer declined to comment on the investment in Bitauto as did Chase Coleman, the Robertson disciple who founded the firm. The same day that the Tiger cub announced the Bitauto transaction, the firm, which has $15 billion in assets, also said in another filing that it ramped up its stake in that company’s rival, Autohome Inc. (ATHM), to 18.5 percent, or more than $300 million.Annual per-capita disposable income in Chinese cities almost doubled to 26,955 yuan ($4,395) last year from 13,786 yuan in 2007, data from the the National Bureau of Statistics show. E-commerce sales increased 47 percent to 629 billion yuan from April through June, surpassing 10 percent of the nation’s consumer goods spending, according to data from Shanghai-based Internet consultant IResearch.
Bitauto has declined 0.3 percent since Sept. 12, trimming its rally this year to 163 percent. It gained 0.2 percent to $83.96 in New York yesterday. The Bloomberg China-US Equity Index rose 0.1 percent to 114.02. The Shanghai Composite Index advanced 0.6 percent today. CAR Inc., a Beijing-based car rental company, jumped 29 percent on its debut in Hong Kong.
Stock Valuation
Tiger Global, which was seeded by Robertson, an industry pioneer, runs hedge-fund, private-equity and long-only stock strategies. Coleman was previously a technology analyst at Robertson’s Tiger Management LLC, where he worked from 1997 until 2000. The fund gained 20 percent this year through August, according to a person familiar with the performance, who asked not to be named because the information isn’t public.Bitauto trades at 38 times estimated 12-month earnings. The multiple peaked at 44.6 on Aug. 26. The average ratio for companies on the Bloomberg China-US Equity Index is 17.2.
The stock’s surge has pushed Bitauto’s market capitalization to $3.7 billion, six times what it was a year ago. Sina Corp., the Chinese Internet media company that went public in the U.S. 14 years ago and also provides auto listings, has a market value of $3 billion.
‘Compelling Story’
“Bitauto’s stock price has fully reflected market expectations for its growth after quick gains,” Henry Guo, a San Francisco-based senior analyst at JG Capital, said by phone yesterday. “Its market value has even exceeded established Internet companies that also run car listing service.”Bitauto gets more than half its revenue from advertising, according to financial statements. About 30 percent of sales come from auto dealers that use its website to create their own online showrooms. The company posted revenue of 1.44 billion yuan last year, a 36.2 percent increase from 2012.
Autohome, also based in Beijing, slid 0.1 percent to $45.29 yesterday and is up 24 percent this year. Its American depositary receipts have almost tripled from their $17 initial public offering price in December in New York.
Gustavo Galindo, a New York-based portfolio manager who helps oversee more than $10 billion of emerging-market assets at Russell Investments, said buying the auto websites fits with a broader trend of investors seeking to tap the increase in consumer spending as well as high rates of Internet usage in China.
“This will be a compelling story for years to come,” Galindo said by e-mail. “The point is not to get access to a technology company, but the really important point is, through technology, getting access to the growing Chinese consumer market.”
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