Date
18 October 2017
China's TV homeshopping market has lot of room for growth. Photo: Bloomberg
China's TV homeshopping market has lot of room for growth. Photo: Bloomberg

INTERVIEW: SMG-CJ Homeshopping mulls IPO to gain M&A heft

Shanghai SMG-CJ Homeshopping Co. Ltd., a unit of China’s largest television shopping operator Shanghai Oriental TV Shopping, is planning a stock market listing to build up its muscle in preparation for potential mergers and acquisitions (M&A) deals in the future, a top executive said.

“We do not need financing, going public is only a means for our future M&A plans,” managing director Kim Heung Soo told the Hong Kong Economic Journal’s EJ Insight.

The company is “considering A-share or H-share listing” but could eventually opt for a domestic float in Shanghai as China has reopened the initial public offering (IPO) tap, he said in an interview.

SMG-CJ Homeshopping is 40 percent owned by Shanghai Media Group and 16 percent by Korea-listed CJ Corp., while some venture capital firms also have some stakes. “They will be responsible for the listing,” Kim said, without elaborating.

The company clocked revenue of 7.63 billion yuan (US$1.26 billion) in 2012, compared with 150 million yuan in 2004. The revenue growth reflects the huge potential in the market, it said. Kim expects income this year to reach 10 billion yuan, up from an estimated 8.5 billion yuan in 2013.

According to the executive, 60 percent of SMG-CJ’s revenue comes from TV shopping while 21 percent is from internet shopping and 4 percent from mobile phone transactions. The firm’s operating profit margin is at about 6 percent.

“We aim to achieve 10 billion US dollars revenue in the next five years and reach 100 billion yuan by 2020. It will mean we will be the biggest TV shopping company in China and in the world,” Kim said. “We tend to focus on the female market including jewelry and clothes.”

Last year, the TV shopping market in Shanghai, Zhejiang and Jiangsu was estimated to be worth about 12 billion yuan while the overall national total was about 40 to 50 billion yuan, accounting for 0.3 percent of the total consumption of the country, the executive said.

In comparison, South Korea’s TV shopping market was worth about 60 billion yuan, despite the country having far less population, accounting for 6 percent of the total consumption in the country, he said. That shows the tremendous room for growth the business has in China.  

Currently, there are more than 30 TV shopping companies in the mainland. “Hopefully by 2020, there will be three giant TV shopping companies in China after the consolidation. We may also make acquisitions of e-commerce operators and logistics companies in China,” Kim said.

M&As

China’s State Administration for Industry and Commerce said on Dec. 19 that it will strengthen the supervision work on TV shopping commercials to prevent exaggerated sales pitches and misleading product information.

It said it will join hands with the Ministry of Commerce, the Ministry of Industry and Information Technology and the Ministry of Public Security in tackling the issue.

“We have very tight scrutiny on quality; buyers can ask for refund, without having to give any explanation, within a week from their purchases,” Kim said. He admitted that the reputation of online shopping operators in China is generally “not good”. 

To adapt new media into its business, SMG-CJ Homeshopping has established partnerships with groups such as T-mall. Meanwhile, it is also in talks with Youku.com, the mainland’s leading internet video hosting site, for launching e-commerce content on their platforms.

As people are increasingly switching to mobile and internet shopping from traditional stores, “we are trying to condense the 30 minutes of air time into a 30-second clip and stream it to mobile phones,” Kim said. By 2020, new media shopping could take up half of the consumption market, he added.

With regard to overseas forays, SMG-CJ will make its first moves in the Asian region. “We have talked with some American-owned TV channels such as Star TV and some British ones as well as those from Asian countries including Indonesia, Thailand and India,” Kim said.

– Contact the reporter at ayishahma@hkej.com

RC

 

Ayishah Ma is a financial reporter on Greater China issues.

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