Author: Helen Wang
Winner-take-all is a Texas hold ’em concept, where the winner takes all the chips off the table. Before the Internet era, there were few winner-take-all companies.
Amazon, however, is an exception.
Founded in 1995, Amazon started as an online book seller. Now it has expanded into a wide range of other products, becoming the world’s largest online retailer and the world’s second-largest Internet company.
What many don’t know, however, is that the company, which has been a shining star, has been losing money for more than a decade.
In April 2000, Amazon released its first-quarter results that showed the largest U.S. online retailer continued to lose money — a net loss of $308 million, or 90 cents per share, for the quarter. Excluding the merger’s installment and other expenses of $187 million, it lost $121.5 million, or 35 cents per share.
Amazon’s cumulative losses amounted to $1.2 billion over the next six years.
Successive losses have led the public to question whether Amazon will eventually make a profit.
But Bezos, the founder and CEO of Amazon, is confident that Amazon and its other subsidiaries will eventually make money.”People are so passionate about the future of the Internet and e-commerce that they invest in it with this faith more or less. We are convinced that focusing on short-term profits is a big mistake. At the same time, we certainly have to look at long-term profits.”
It turns out that Amazon spends most of its annual profits on projects that make sense for the company in the long run.
Amazon opens at $2007 / share on September 4, 2018. But who would have guessed that Amazon’s share price was only $300 in 1998 and crashed to a low of $5 in 2000 because of losses.
Amazon offers a return of nearly 400 times to those who invested in it during the downturn, certainly on the premise that you stick with it.
Therefore, for the loss of the company, investors should not easily give up. China Binary (HK08255) is one of them.
It is also a company that is currently losing money.
According to the interim earnings figures released on August 8, 2018, for the six months ended June 30, 2018, China Binary realized revenue of RMB 15,444,000, up 77.37% year-on-year. Gross profit was 9.311 million yuan, up 148.36% year-on-year. Loss applicable to shareholders was 22.59 million yuan, an increase of 786.58 percent year-on-year; The basic earnings per share is 4.71 cents per share, without dividend.
reasons on deficit
Amazon is losing money because it has invested in Amazon cloud services, a long-term development that makes sense, not because they have no value.
What’s behind China Binary’s loss?
This is worth studying.
The data shows that China Binary is neither completely unprofitable nor struggling in company operation. The main reason for the increase in losses during the reporting period is the decrease in revenue and the increase in administrative expenses.
In terms of revenue, the number of online trading services that the group provided to online game operators via China Binary system is about 422000, transaction amount is about 26.624 million yuan, down 82.80% year-on-year, according to its medium-term earnings. The main reason for the decline is that a small number of online game operators with relatively large trading volumes have seen a decline in trading volume. The company is actively expanding new game operators to boost volumes as soon as possible.
Despite the revenue decrease, in terms of administrative expenses, “with the strategic upgrade, China Binary will make efforts to develop new software technology services as well as the research, development and sales of intelligent hardware products, which leads to a sudden increase in expenses.”
In other words, the loss is due to the investment in long-term development projects, for example:In terms of hardware, China Binary has launched MasterDAX, a cloud technology product.
The product is one of the highlights of China Binary’s comprehensive strategic transformation. MasterDAX has adopted Microsoft Azure as the Blockchain cloud technology platform, launched a new generation of Blockchain business solutions, and used Microsoft’s Azure Blockchain Workbench to provide a set of pre-built network and infrastructure for Blockchain developers and assist developers to simplify development operations. It is an important scenario and practice based on products, solutions and services under the hybrid cloud architecture. In a nutshell, it is an underlying technology service provider of ToB.
At present, the product has accumulated more than 30 customers through the early development and later operation, and gradually gained the recognition of customers. It can be predicted that in the near future, the performance of China Binary will also improve with the outbreak of the product.
In addition, China Binary is also laying out for long-term investment including other products and technologies.
Taking XKey as an example, its function is to dig out idle digital assets, such as spare storage, bandwidth, CPU and other computing capacity, and then contribute to the network to share computing power and achieve the goal of improving the scope of some financial applications through new technologies.
The product has been launched in the world since the end of March 2018, and began to be produced in real volume in April and may. However, after three or four months of development, the product now has 67,000 users and maintains a strong growth momentum, which is indeed a rapid growth.
Products require input, as do other financial services in China Binary’s layout.
In the strategic transformation of China Binary, it is the future sector to use underlying new technologies to transform the business of traditional financial industry. At present, China Binary has successfully obtained a banking license of CBiBANK in the whole territory of the United States. Insurance and broker licences are also under negotiation, all of which require upfront investment, leading to a loss for China Binary.
If the loss is for future development, or business lay-out for the longer term, as Amazon does, then the company clearly deserves attention for it is not the losses in general.
Or, if one day these businesses start to explode, it will be like Amazon ten years from now. When Amazon cloud services’ revenues double, everyone will see the value of the company’s investment.
It’s time that proves the value of an enterprise’s investment.
The anomaly at the dark time
As a result of its losses, China Binary is now at a low point, with its market value at an all-time low, similar to Amazon’s $5 in 2000.
Could China Binary have a counter attack?
There’s no doubt that China Binary is at its darkest hour in today’s capital markets. But light comes from darkness. Undoubtedly, today’s China Binary is at a trough, or even a bottom, but as MasterDax’s profitability has been gradually strengthened and XKey has touched the backdrop of earnings, China Binary’s comeback is in sight.
Maybe we can assume that if China Binary really succeeds, the company’s valuation will not be the current one. Investment is such a risky thing. More importantly, what is the market value of a public company if it has several banks or insurance?
This is something that many people can imagine.
Of course, for China Binary’s controlling shareholder Sun jiangtao, he chose to enter the market at low because he has seen the opportunities that others don’t see. He also holds out hope that he could actually turn China Binary’s business around.
In January 2018, China Binary (08255-hk) announced that chairman and non-executive directors Wei zhonghua and Wei chunming sold a total of 1017.6 million shares to DataKingLimited which is held by the executive director and chief executive Sun Jiangtao, accounting for about 21.2 percent of the issued share capital, at a total cost of 50.88 million yuan, equivalent to 0.5 yuan per share, representing about 16.67 percent discount to the pre-suspension closing price of 0.6 yuan.
After completion of the stake sale, Sun Jiangtao and its concerted action people hold a total issued share capital of about 51%.At the same time, they are required to make an tender offer of $0.50 per share according to the regulations. The offeror intends to maintain the listing status of the shares on the gem after the closing of the offer.
“After the completion of the tender offer, Sun jiangtao will conduct a review of the group’s business activities, operational and financial condition to make business plans and strategies for the group’s future business development. Depending on the outcome of the review, if appropriate investment or business opportunities arise, the offeror may seek other business opportunities for the company, which may involve the acquisition or investment of assets and cooperation with the offeror’s business partners, with a view to promoting the business growth of the group and strengthening its asset base and broadening its revenue stream. On the date of this joint announcement, the offeror has no plan or any discussion or consultation with respect to the injection of any assets or business into the group.”
As a serial entrepreneur who has achieved financial freedom, Sun jiangtao’s acquisition is of great significance.
To observers, it is clear that his biggest reason for buying back his stake in China Binary and becoming an absolute majority shareholder is that he wants to make a business of it.
This is how things are .
With the change of controlling shareholders, China Binary’s business transformation is also taking place at the same time.
In July 2018, China Binary(08255.hk) announced that the resolution submitted in the notice of the special general meeting of shareholders has been formally adopted by shareholders by voting on the number of shares.
The resolution involves approving the change of the company’s English name from “China Binary Sale Technology Limited” to “China Binary New Fintech Group” .
As for its future prospects, China Binary’s announcement describes it as follows:
“the group will continue to explore suitable investment opportunities in Internet economy-related businesses (such as financial technology and blockchain technology) to improve the profitability of the group and the value of its shareholders.”
That is to say, in the future, China Binary will also launch investment in frontier technology fields such as blockchain, big data and artificial intelligence. China Binary of the future will present an ecosystem of fintech rather than a purely online payment business, which combines the business of traditional finance with underlying new technologies, as well as hardware products and investment businesses.
As for performance and losses, these are clearly the pains of transition.
It’s just like no one has imagined Apple’s transformation from a computer business to consumer electronics like phones.
As a result, the key to investing in a technology company is investing its future. Obviously, the future of China Binary is worth imagining. Of course, it also takes time for China Binary to step out of the dark.
For a company that is losing money because of its transformation in its darkest hour, like Amazon, would you dare to invest?
