Transcription of Finance News Network Interview with 99wuxian Limited (ASX:NNW) Chairman, Ross BensonDonna Sawyer: Hello I’m Donna Sawyer from the Finance News Network and joining me from Chinese mobile online marketplace, 99wuxian
(ASX:NNW) is Chairman, Ross Benson. Ross welcome to FNN.
Ross Benson: My pleasure to be here Donna.
Donna Sawyer: 99wuxian is probably one of the more unique companies to list on Australia’s Stock Exchange. Tell me about your company and its main areas of business?
Ross Benson: It is very unique; in fact I think it’s the first pure M-commerce business to IPO anywhere in the world. What makes it very exciting is that this is M-commerce in China and it’s a market we would consider to be, the most wide market for M-commerce in the world. You have increasing numbers of consumers, you have increasing spend per consumer. And you have an adaption rate of new technology around mobile devices, double any other country in the world. You have 1.1 billion mobile phones, you have the highest number of mobile internet users in the world and that makes for a very, very exciting cocktail for a business that’s growing very quickly.
Donna Sawyer: It seems you’re in the right place to capitalise on the emerging mobile commerce market in China. Tell me about that market?
Ross Benson: Certainly, so if we just put it in perspective, the retail sales in China for the 2012 year were approximately $AUD3.7 trillion. Then E-tailing which is that part of retail sales done by consumers online, is approximately $US200 billion. You then have M-commerce, which is approximately $US8 billion for the 2012 year. That was an increase from the 2011 year of approximately 500 per cent from $US1.7 billion.
So this space of M-commerce is growing very, very quickly. The independent experts such as your McKinsey’s, your Deloitte’s, Gardener’s, A.C Nielsen are all forecasting growth in M-commerce in China to be in excess of 500 to 600 per cent, in the next three years. As a lead indicator for M-commerce, we’ve also seen E-commerce grow by an average of 120 per cent per annum for the last 10 years.
Donna Sawyer: What business most closely resembles 99wuxian and who are your local competitors?
Ross Benson: There’s virtually no business that closely resembles 99wuxian in China now. We have a dominate market position in B to B to C, and we are connected currently to eight of the 10 major banks in China, which include the four largest banks. So this unique position in terms of this B to B to C market, we hold a dominate market share. By market share in volume in transactions last year, probably Taobao, which is owned by Alibaba was the major player. But the interesting thing is that their business is predominantly B to C.
And with any new technology or consumer behaviour, you always get what we will call the low-lying fruit and your early adopters, taking up that technology. So we see the big opportunity in well qualified customers coming through these banking channels, because they are a far better quality customer to acquire.
Donna Sawyer: So what are the risks?
Ross Benson: Well there’s risk with any business. I think in relation to 99wuxian, if we break it up into structural risks, we have very tight corporate governance policies. We have a Board that has four non-executive directors, three independent, we have a depth of experience in the Board. From a structural perspective, we also have to consider that we’ve gone through a process that has required adherence to PRC Regulations, Hong Kong Companies Law, Australian Corporations Law, the ASX Regulations and also the Australian Securities and Investment Commission requirements. So the hurdle rate there is very high.
From an operational perspective, I think the way to mitigate the risk in China and certainly for 99wuxian, what we’ve done is ensure that our partners are firstly very large financial partners. And that you have very strong top-down buying, which means that you must be closely associated with and contracted to government related organisations. In our case that’s China UnionPay. China UnionPay has a complete monopoly on clearance and settlement in China.
Donna Sawyer: You have a number of high profile business partners including many Chinese banks. Why have they embraced your service?
Ross Benson: I think from the banks’ perspective, bearing in mind that M-commerce is a change of behaviour. They know that in due course, those consumers in China that currently are spending $AUD3.7 trillion odd, will start using and want to use their mobile devices for not only online purchases, but mobile banking. So what we’re finding is that the banks are very enthusiastic to reach out and acquire these customers, as mobile banking customers. And in our case, once they acquire that customer for mobile banking, our platform sits embedded in that mobile banking app that the bank pushes towards their customer.
So they’re enthusiastic to acquire the customer for mobile banking and also to ensure that the platform that they connect those customers with, for in our case an online mobile marketplace, has a lot of integrity around the engagement of merchants. And to ensure that it’s got a very transparent and secure mobile settlement system. And in our case, because that’s in conjunction with UnionPay, we give the banks a lot of comfort.
Donna Sawyer: Let’s talk about your listing now. When are you planning to list and how much are you looking to raise?
Ross Benson: The targeted IPO date is the 8
th of October and we’re aiming to raise $AUD20 million.
Donna Sawyer: So what market cap will that give the Company?
Ross Benson: That would give us - post listing, that would give us an implied valuation of approximately $410 million, which equates to around about $AUD8.70 per registered user. The platform currently has 22 million registered users, and we’re seeing that grow very strongly every month.
Donna Sawyer: Why have you chosen to list here in Australia?
Ross Benson: There’re a number of reasons. The first one is that the Chinese see the Australian market as very transparent and well regulated. From a local perspective, because their counterparties are very large banks and organisations, they gain a lot of - in Chinese sense face, by listing on a foreign market. So Australia is one of their preferred destinations.
The second thing is that we are seeing domestically a very strong demand from Australian investors, both private and funded institutional investors, looking to gain exposure to some of these very exciting areas of consumer growth in China. And as I said before, M-commerce is to a large extent, seen as the next resources boom in China.
Donna Sawyer: Ross Benson, good luck with the float.
Ross Benson: My pleasure, thank you Donna.
Ends
