[stock] Weimob - major SaaS provider in China with strong growth potential

Company overview

Weimob is a provider of i) cloud based commerce and marketing solutions and ii) targeted marketing solutions for SMB (Small Medium Enterprise) in China. The Company’s commerce cloud solutions allow customers to open and manage their online businesses, while the marketing cloud solutions provide tools for customers to target audience and optimize online marketing initiatives. Wei Mall (微商城) – for example – is one of the key commerce cloud solutions provided by Weimob; Wei Mall provides tools for covering the various stages of e-commerce including client acquisition, conversion, marketing and client re-purchase, and efficiency improvement. The Company launched the Weimob Cloud Platform in 2017, allowing 3rd party developers to develop apps, building Weimob’s SaaS offering into an open ecosystem.

Source: Company website

Competitive advantage

Scale / network effect is one of the keys to success in the software space, and Weimob is a one of the leading player in the commerce / marketing SaaS industry. We note that the competitive landscape is still relatively fragmented in the China commerce / marketing SaaS industry, so industry consolidation is a tailwind for the Company. Furthermore, the Company has a strategic partnership with Tencent (with Tencent providing cloud based technology infrastructure to Weimob), while actively expanding product delivery to other platforms such as Toutiao, Douyin, Kuaishou and Baidu. 

Source: Company website

Valuation

Currently, the company is only trading at <9x Fwd12m P/S, compared to 28x (Shopify, SHOP US), 15x (ServiceNow, NOW US), 14x (Adobe, ADBE US), 7x (Salesforce, CRM US). We believe the upside to the current share price will come from i) strong revenue growth in the next five years (~25% revenue growth per year) and ii) a higher P/S multiple (eg, from 10x right now to ~15x which is more inline with global peers). We can notable upside in the Company’s share in the long run. 

Source: Bloomberg

Risk

Increasing competition from technology giants, regulations.