“What a perfect combination of finance and technology!”
Looking at the data reports listed on the large electronic screen on the stage, Robert from Goldman Sachs praised them.
"That's right!"
Morgan Stanley's Evans nodded, "There are more than 800 million registered users worldwide. Isn't this number several times higher than PayPal?"
“PayPal only announced in February this year that its global registered users exceeded 200 million, and now it has at most a quarter of Mobao Pay’s user base.”
Wang Zheng from Bank of America Merrill Lynch added with a smile that an incredible company like Ruixiang had emerged in China, leaving PayPal behind. As a Chinese, he felt extremely excited and proud.
The Credit Suisse colleagues sitting next to them poured cold water on them, "Don't underestimate the number of PayPal users, but they are all distributed in developed countries in Europe and America. The revenue and profits they create every year are not those in Southeast Asia, South Asia, or even Africa."
These backward areas are comparable.
PayPal's revenue in 2016 was US$10.8 billion and net profit was US$1.4 billion; this year's forecast revenue is US$13 billion and net profit is US$1.8 billion.
In addition, the market value has also approached the 100 billion U.S. dollar mark!
In conversion, one user is worth four to five hundred US dollars.
Do you think the two can be compared?"
Several people shook their heads. PayPal was indeed not suitable to be used as a benchmark for Rui Xiang.
According to this valuation method, if Ruixiang’s 800 million users are multiplied by 400 or 500 US dollars, the valuation will be 300 to 400 billion US dollars.
This size is already on the same level as Ahri and Penguin.
This does not mean that Ruixiang cannot achieve this valuation. The key is to come up with some convincing financial data.
For example, revenue of 40 to 50 billion US dollars and net profit of 18 billion US dollars.
“Tell us about Ruixiang’s financial report!”
Mansour first smiled at Zhang Yida, then glanced at the investors around him, "I believe everyone is impatient to wait."
"good!"
Zhang Yida pressed the PPT controller in his hand, and the PPT page on the large electronic screen changed, and a set of bar graphs appeared.
“In 2014, the revenue was 6.52452 billion yuan and the net profit was 744.7 million yuan;
In 2015, revenue was 15.514 billion yuan and net profit was 377 million yuan;
In 2016, the revenue was 32.108 billion yuan and the net profit was 255 million yuan;
In the first half of 2017, revenue was 26.906 billion yuan and net profit was 69 million yuan.”
Zhang Yida smiled at the investors in the audience: "This is the financial report of Ruixiang Group for the last three and a half fiscal years. Do you have any questions? If not..."
"Wait a minute!"
Chen Weimin, the investment representative of Khazanah Nasional Bhd, suddenly interrupted, attracting everyone's attention.
Chen Weimin also realized that he was a little out of control, and explained with a smile: "I don't mean anything else, I just think this profit level is a bit strange."
Why did he feel strange? He saw that Ruixiang's net profit was getting lower and lower, which was completely contrary to a normal company.
Other companies suffer losses in the early stage and continue to expand profits in the later stage.
The sharp direction is bad, and the profit level is not as good as every year.
With Chen Weimin's reminder, other investors also noticed this problem and turned their attention to Zhang Yida.
Zhang Yida was not nervous at all and said with a smile: "So this is the question. Don't worry, everyone. I will give you a satisfactory answer."
"Let's continue looking down!"
Zhang Yida turned the page of the PPT and introduced the detailed business income of each year.
All investors stopped making random speculations and began to focus on the stage.
By the time Zhang Yida finished breaking down the main business and expenses for the three years of 2014, 2015, and 2016, many investors had already figured out the "mystery" of the financial report.
Most of the money is spent on mobile payment market subsidies and investment in research and development of cutting-edge technology.
“In the first half of 2017, the advertising revenue of the six major financial supermarkets was 4.208 billion yuan, and the net profit was 2.775 billion yuan;
Mobile payment business revenue was 10.7 billion yuan and net profit was 1.284 billion yuan;
The consumer finance business includes two major products, Yongbei and Daibei, with revenue of 7.82 billion yuan and net profit of 5.083 billion yuan;
Wealth management business, including banking, securities, funds, insurance, etc., has revenue of 1.266 billion yuan and net profit of 944 million yuan;
Digital technology and enterprise services, including Ruixiang Cloud, Mungdou Credit, Tiance Technology, etc., had revenue of 2.487 billion yuan and net profit of -10.138 billion yuan.
Other business revenue was 425 million yuan and net profit was 121 million yuan.”
After listening to Zhang Yida's introduction of various revenue components and the profits of various businesses in the first half of 2017, all investors understood.
The losses of over 10 billion in digital technology and enterprise services are very conspicuous, which means that the cost of R&D investment far exceeds the revenue brought back by technology applications.
The mobile payment business is profitable, but the profit margin is very low, just over ten points.
Zhang Yida also explained the reason for this situation: Although the marketing subsidies for mobile payments have weakened recently, they will continue to be maintained for a long time.
Consumer finance is Ruixiang's cash cow. It obtains funds from banks or bond markets at a capital cost of less than 6%, and then lends them to users at an average annual interest rate of 18%, with a gross profit margin of close to 70%.
Investors were whispering among themselves, exchanging their views on the financial report.
Zhang Yida did not interrupt and just watched them quietly on the stage.
If Ruixiang wants to make a substantial profit, it can do so at any time, and its annual net profit will not be less than 20 billion yuan.
However, doing so would undoubtedly lead to chronic suicide.
First, stop burning money in the field of cutting-edge technology, and second, reduce marketing subsidies.
Marketing subsidies are now running out. Ruixiang, Tenpay, and Leech Financial have reached a tacit understanding. It is important to make money first.
After the mobile payment war that lasted for two or three years, no one benefited, and at the same time, there was no way to win.
So under this situation, the three mainstream payment companies have begun to change their strategies, after all, they have to make ends meet.
Last year, Leech Financial was the first to announce fees for cash withdrawals and credit card fees. Then Penguin followed suit.
Zhang Yida hesitated for a while, but chose to follow up.
If Ruixiang uses this as a gimmick and announces that there is no charge, it can indeed attract some users.
But it won’t take long, Penguin and Leech Financial are expected to announce that they will “abort fees” and continue to be free.
In this way, the industry has entered a vicious cycle again.
This vicious cycle is not good for Ruixiang, because no one has a big business.
Moreover, Ruixiang is now gradually turning its main attention overseas, requiring large investments. At this time, the profitability of domestic business is crucial.
Investors have also been putting pressure on Ruixiang: make profits as soon as possible and IPO as soon as possible.
“Let’s take a look at this table next!”
Zhang Yida spoke and attracted investors' attention to the stage again.
After turning the PPT page, Zhang Yida pointed to a histogram and introduced:
"Ruixiang's scientific research investment in 2014 was US$400 million, US$800 million in 2015, US$1.6 billion in 2016, US$1.6 billion has been invested in the first half of 2017, and the full year is expected to be about US$3.2 billion."
Many investors in the audience covered their foreheads, they were so crazy!
In three and a half years, US$4.4 billion was invested in cutting-edge technology, which is 28.8 billion when converted into RMB.
This should have been the net profit of Ruixiang Group, but now it has all been filled into the bottomless pit of scientific research.
However, no one doubts that after all, the money spent is in exchange for Ruixiang's technical moat.
In this era of rapid technological advancement, being a miser is undesirable.
Zhang Yida has also learned about the annual R&D investment of Leech Financial Services Group, and Ruixiang has basically caught up with it.
Leech Financial Services Group was established in 2014, but its predecessor, Alipay, was launched in 2003.
With 10 more years of development than Ruixiang, Leech Financial's various technical reserves and talent reserves are not comparable to those of the former.
In order to close the gap, or even smooth it out, Zhang Yida could only choose to burn money.
Through Ahri’s financial report and the agreement that Leech Financial needs to share 37.5% of its net profit with Ahri.
It can be inferred backwards that the net profit of Leech Financial Services in the first half of 2015-17 was 4.2 billion, 2.8 billion, and 7.3 billion respectively.
Regarding these figures, Zhang Yida believes that they are also "very knowledgeable".
Similar to Ruixiang, this should also be the remaining figure after a large investment in research and development.
The real profit may be three or four times this number.
"Series A financing is US$50 million, series B financing is US$500 million, series C financing is US$2 billion, and series D financing is US$2.5 billion. Where are these financing funds invested?"
Some investors were curious about this question and asked Zhang Yida.
"Let me explain first that the Series C financing has only US$1.5 billion in cash, and the other US$500 million is resources provided by Penguin."
Zhang Yida explained with a smile, and then continued: "Part of these financing funds served as R&D funds for early scientific research. After Ruixiang generated positive cash flow, it was replaced by the company's reserve cash;
Another part has invested in a series of ecological enterprises such as Grab and GoJek, as well as building overseas local e-wallets.
The construction and expansion of Ruixiang Cloud Computing Center also relied on financing, and tens of billions of yuan have been invested so far.
The last part, Ruixiang Industrial Investment Fund, Phase III Fund, Ruixiang as GP invested a total of US$700 million.
In addition, we acquired Station B and Pure City, launched a cultural revitalization fund as an LP, bought Ruixiang Building, and built the second headquarters in Chengdu..."
Many investors present frowned, using equity financing funds to make investments. What kind of ridiculous operation is this?
Zhang Yida saw their confusion and didn't explain too much.
Switch the PPT to the next page and start introducing Qi Ruixiang’s third-phase industrial investment fund.
"In the B+ round of Kuaishou, Ruixiang Industrial Fund invested US$30 million in the first phase and obtained 5% of the equity. After dilution, it still holds 3.83% of Kuaishou's equity, worth US$383 million, with investment income of US$353 million.
Ruixiang holds one-third of the first-phase industrial investment fund, and as a GP, it can receive a return of US$164.73 million.
Bitmain’s A round, Ruixiang Industry Fund invested US$5 million in the first phase and obtained 15% of the equity.
Last month, Bitmain just completed a US$50 million Series B investment led by Blackshirt Capital, entering the ranks of unicorns with a valuation of US$1 billion.
After dilution, Ruixiang's equity still remains at 14.25%, worth US$142.5 million, with a return on investment of more than 28.5 times.
…”
Zhang Yida introduced one by one the 27 projects invested by the first phase of Ruixiang Industrial Investment Fund.
Including time of investment, shareholding ratio, current valuation of the project, market position, return on investment, etc.
The investors in the audience were dumbfounded. What does this mean?
Is an industrial investment fund alone worth tens of billions of dollars?
Mansour's heart moved, and he asked Zhang Yida with a smile: "Um...my friend, when will the fourth phase of Ruixiang Industrial Investment Fund start raising funds?"
Zhang Yida coughed and said, "This issue... let's discuss it in detail when we come down! Of course I welcome friends!"
Mansour also realized that now was indeed not a good time to discuss this issue. The time and place were wrong, so he smiled apologetically at the investors around him.
Not only Mansour, but other investment representatives are also interested.
How is this a technology company? It’s simply an investment company disguised as technology.
They also wanted to ask Zhang Yida about the fourth phase of the fund, but the occasion was not right.
Everyone made up their mind to have a good chat with Zhang Yida in private to see if they could get a ride.