Tencent-backed Meituan-Dianping files for IPO Tencent-backed Meituan-Dianping files for IPO Tencent-backed Meituan-Dianping files for IPO

Tencent-backed Meituan-Dianping files for IPO

Tencent-backed Meituan-Dianping, a Beijing-based technology startup and China’s answer to Groupon, Uber Eats, and Yelp all rolled into one, has filed for a Hong Kong IPO. Full details of the listing are yet to be released, but Meituan are said to be seeking to raise at least $4 billion, according to the China Securities Journal. 

Meituan is the worlds fourth most-valuable tech startup, according to Bloomberg, and has been growing at a rapid pace, offering hotel, travel, shopping, entertainment, and food delivery services to China’s ever-increasing consumer demographic. Meituan connects offline merchants to online consumers through a smartphone app/social platform providing on-demand access to a vast range of products and services from manicures, massages, and home delivery meals to movie tickets and bike hire.

The company also allows consumers to review restaurants and services within the app which drives traffic cheaply through the platform; this traffic is then monetised through the purchases and group discounts paid for with an integrated, in-app payments system connected to users' WeChat pay or Alipay accounts. 

Meituan has grown at a startling pace and now has more than 300 million annual transacting users (similar to the entire US population). Revenue has also grown rapidly, increasing 161% year-on-year to 33.9bn yuan ($5.2bn) in 2017. Last year, however, the company posted a loss of 18.99bn yuan, according to the prospectus, although after adjusting for changes in the value of convertible redeemable preference shares, share-based compensation expenses, and other items, the adjusted net loss was recorded as 2.85bn yuan.

Operating losses are trending down (decreasing 39% from the year before) and if revenue continues to grow in line with the current trend the company will soon turn a profit. Meituan still has a ways to go, but if the top line growth accelerates in tune with the rapid acquisition of new users, then the potential is there.

Operating loss is trending down (decreasing 39% from the year before); if revenue continues to grow at the current trend, the company will turn a profit before long. 

Meituan-Dianping data
Source: Saxo Bank
Meituan operates within the Chinese consumer service industry, which is set to benefit from demographic shifts from the rapid rise of the Chinese middle class and the consumption upgrades that will follow as disposable incomes rise. Between 2009 and 2030, China will add 850 million people to its middle class, according to Organisation for Economic Co-operation and Development projections. This means the Chinese middle class will grow from 12% of the country's population in 2009 to 73% in 2030, boosting consumer consumption.

In 2016, Chinese e-commerce sales grew to $750bn from 460 million online shoppers, according to Goldman Sachs. This market is expected to grow 23% annually to 2020 as rural and lower-tier cities experience logistic and infrastructure upgrades. 

China also has the worlds largest number of mobile internet users. According to the China Internet Network Information Center, China’s online user base has increased to 800 million as of August 2018, or double the population of the US, and it still has room to grow, benefiting e-commerce service models like Meituan’s. Urbanisation is still significantly lower in China compared to the US and Europe and as more people move to the cities, Meituan’s services will see higher demand.

According to Internet World Stats, only 54.6% of the Chinese population are online compared with 89% in the US. We expect internet penetration and sector revenues to continue rising in the coming years due to the following factors:

1. China has a similar proportion of city dwellers as the US did in 1940 with a population approximately five times the US' size, illustrating that there are still decades of above-average growth and urbanisation to come. 

2. According to McKinsey & Company, China’s mobile payments ecosystem is already 11 times larger than the US; as these trends continue to emerge it will be critical for mobile-savvy Chinese consumers to be online, increasing demand for e-commerce services.

According to iResearch consulting group, Meituan had a 59% share of China’s “on demand” food delivery market in the first quarter of this year with Alibaba’s Ele.me food delivery service being their biggest competitor. According to Shenzhen-based data aggregation company Jiguang, however, Alibaba leads the market by app installations. While it is debatable as to whether Alibaba-backed Ele.me or Tencent-backed Meituan lead the market, what is not debatable is the growth potential. 

The IPO will provide funds for Meituan to compete within the growing Chinese e-commerce industry, allowing the firm to grow user numbers at the same rapid pace and sustain growth, which is a necessity for Meituan to drive eventual long-term profitabilty through scale as revenue growth will then surpass operating costs. 

While there is significant upside potential for Meituan, the industry is highly competitive and does not come without challenges. The growth in the company's annual user base is compelling but the transaction value per user only rose 26% in the last year, indicating that once users are active they do not subsequently increase their spend by any considerable amount. There is also the fact that average transactions per user are only 18.8/year, meaning that the frequency of use is once every 2.7 weeks on average. Given the fast-growing online consumer service industry in China, growth potential certainly exists, but it is likely that this will come with significant marketing costs.

Meituan-Dianping key services and participants
Meituan-Dianping key services and participants
Source: Meituan-Dianping prospectus


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.