TOM Group (02383.HK) has been transforming its business model from a media company to an investment platform focusing on emerging technologies and applications.
WeLab could be one of its most successful investments. The Hong Kong-based financial technology firm is preparing for an initial public offering, which could inflate the value of the 6 percent stake TOM has been holding since 2015.
Last Friday, TOM announced a share swap deal with WE Solutions (00860.HK) as the company is eyeing the latter’s electric vehicle solutions for the rural China market.
The deal involves about HK$124 million from each company, which is not a very significant amount. TOM will hold a 2.27 percent stake in WE Solutions while the EV company will acquire a 1.65 percent stake in TOM.
TOM is an investment flagship of CK Hutchison Holdings (00001.HK) while WE Solutions is controlled by Justin Ho King-man, son of former Macau chief executive Edmund Ho Hau-wah.
Last year, prior to TOM’s investment in WE Solutions, Hong Kong billionaire Li Ka-shing and his business partner Solina Chau Hoi-shuen invested in WE Solutions when the company acquired a majority stake in Japanese electric vehicle maker GLM. Li still holds around 6.8 percent stake in WE Solutions and is still its second-largest shareholder.
WE Solutions was not a famous listed company in Hong Kong until Li’s investment. Its share price, however, failed to benefit from Li’s reputation. WE Solutions’ share price has dropped 56 percent this year as the company is still losing money. It had a net loss of HK$147 million in the first half of this year, after posting a full-year loss of HK$95 million in 2017.
The company’s electric vehicle business is still in the investment stage. Research and development costs for the business amounted to HK$80 million during the first half of this year.
WE Solutions aims to grab opportunities in the mainland market to push its electric vehicle solutions supply chain. The company made several acquisitions and investment in the past year to build up this supply chain.
The acquisition of a majority stake in Kyoto-based GLM in September last year provided WE Solutions with manufacturing technology in electric vehicles. GLM produces high-quality sports cars and is among the few to have the license to make electric sports cars in Japan.
WE Solutions plans to incorporate GLM knowhow into an electric vehicle manufacturing plant it plans to build in the mainland.
After the GLM deal, WE Solutions also acquired several companies, including United States-based 3D printing technologies supplier Divergent Technologies and electric vehicle charging solutions provider EV Power Holding, and formed a joint venture with Shanghai Alliance Investment Ltd., which is backed by the Shanghai municipal government, to adopt 3D printing technologies in the design, development and assembly of electric vehicles for taxis, online hailing services and other related B2B services.
By investing in WE Solutions, TOM wants the company to support its rural e-commerce investment in the mainland.
In a stock exchange filing, TOM said it has been expanding its business coverage in rural China, particularly in the areas of new retail and logistics through partnerships with industry players.
The partnership will allow both TOM and WE Solutions to explore opportunities for future growth in their respective businesses in lower-tier cities in the mainland.
Prior to this, TOM forged an e-commerce joint venture with China Post in 2010. Called Ule, the venture has been investing a lot in rural villages in China.
The partnership with WE Solutions will support Ule’s push into rural China. It will allow Ule and its partners to deliver orders to villages using environment-friendly electric vehicles to better protect the rural ecosystem.
TOM continues to support Ule with its investments in WeLab and WE Solutions. That could make Ule a key player in China’s e-commerce sector by focusing on underserved communities in the countryside.
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