Tag Archives: china

New Investment Idea – Hello Pal (CSE: HP)

Jan 3, 2017

Introductory Remark

The article below is the exact newsletter that was sent out to our subscribers on Tuesday, July 19th, 2016. We would like to take the opportunity to get readers who are not yet subscribers to have a feel for what we are doing at Gecko Research.

Our newsletter is free and easy to sign up for, just make sure that you add ‘info at geckoresearch.com’ to your contact list to ensure that our emails end up in your inbox.

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Introduction

Many of you are probably caught by surprise now as we normally are thought of as being a resource newsletter and while that is true, it’s also far from the truth. We make investments in order to make money, it’s as simple as that, and when we see an opportunity we like we act on it. At the end of the day it’s all about risk vs. reward and today we are introducing a tech company that offers great reward in our mind.

Ten days ago we travelled to the beautiful city of Hangzhou in China (this >9 million people city will host the next G20 Summit on Sept 4-5, 2016) to see for ourselves what Hello Pal was all about. Not only did we get the chance to meet the friendly and welcoming staff of Hello Pal, we also had the opportunity to meet with one of Hello Pal’s largest shareholders. We went to the offices of New Margin and sat down with its Managing Partner Mr. Hans Xu.
Mr. Xu is one of the largest shareholders of Hello Pal and his/New Margin’s participation is a large part of our investment decision.

It’s mind-boggling how large the upside can be if Hello Pal turns out to be a success. We are not saying this will be the next Snapchat or Twitter, but Hello Pal most definitely has all the components to reach its own level of success. And for the next 12 months or so, we see very little risk which we will explain more about.

Hello Pal (CSE: HP / OTCQF: HLLPF / Frankfurt: 27H)

To invest money in an app are in many cases a “fly or die” scenario, either it won’t go anywhere or it will fly to the moon. So while these investments are quite risky, we would suggest that Hello Pal isn’t as risky due to the participation and backing of its largest shareholder New Margin.

Investment Highlights

  • Hello Pal was recently launched and already achieving high numbers of registered users with no marketing and thousands of new users registering daily
  • Recent oversubscribed financing and no debt with low burn rate.
  • Launching aggressive PR and user acquisition campaign. Expansion of technical and marketing team
  • Major Chinese shareholders with substantial financial backing and deep business and entertainment networks
  • Messaging has emerged as the new frontier of social on mobile and apps built on messaging platforms have high user retention and engagement
  • Rapidly growing language learning market particularly in mobile E-learning

People
Many people can come up with a great idea, but if you don’t have the right people to execute the idea, it’s at risk of becoming a failure. KL Wong, founder and CEO of Hello Pal, has an impressive CV to his name. KL, a Malaysian born, studied and worked in the UK for 10 years. He graduated with a law degree from Cambridge University and started off his career as a lawyer at Clifford Chance (world’s largest law firm) in the UK and Hong Kong. KL is fluent in English, Mandarin and Cantonese, and has a working knowledge of Malay and French. He is currently learning Japanese and Korean.

In 2008, shortly after the birth of his daughter Felicity, KL founded BrillKids Inc., creator of the multiple award-winning early childhood education program Little Reader. Having already one internet success under his belt, KL Wong knows what it takes to make Hallo Pal his next success.


Money, Valuation & Listings

Hello Pal first got listed on the CSE (Canadian Stock Exchange) on May 13th of this year after closing an oversubscribed placement of C$1.8m. Most of this money will be used in large part for user acquisition in order to aggressively increase the user numbers further.

Apart from a strong investor demand, Hello Pal also has the backing of New Margin, one of the top three Venture Capitalists in all of China with more than US$3B under management. New Margin has invested more than $1.7B in more than 160 companies of which over 40 have gone public in domestic or international stock exchanges. That track record speaks for itself and as the Chinese are well-known for their patience and shrewdness, we don’t see a lot of risk in the next year at least as New Margin will support Hello Pal going forward.

In the world of apps & internet the upside is virtually unlimited which makes for great risk/reward. And although the risk is also there, we don’t see it as very big in the first year or so because of the backing and strong connection to New Margin. Hello Pal will not have an issue finding new money as they go forward.

Hans Xu, whom we had the pleasure to meet on our trip to China, is a key managing partner at New Margin. Not only that, he is personally one of the largest shareholders in Hello Pal. For someone with Hans’ connections, influence and investment experience, Hello Pal must be a small investment in comparison. That tells us a bit on how big the potential in Hello Pal is.

Now why would a multi-Billion VC firm invest and support a small start-up app? What’s better than a quote from Hans Xu himself on the matter:

“Hello Pal is one of the best app ideas since I saw QQ* which is now worth billions”

Fully diluted, Hello Pal has 70m shares which at 40 cents give the company a Mcap of 28 Mcad. With what’s known today, that feels like a fair valuation. At the same time one must recognize that Hello Pal is a fairly new company and unheard of by most investors. As milestones are met and the app grows, we think the industry will be forced to discover and recognize Hello Pal. The potential for exponential growth is absolutely there and if that happens, we want to be invested.

Hello Pal’s main listing is on the Canadian Stock Exchange under the symbol ‘HP’. To make things easier for international investors, Hello Pal has established secondary listings on the OTCQF under the symbol ‘HLLPF’ and on the Frankfurt Exchange under the symbol ’27H’.

*QQ is a chat application for Facebook

 

What is Hello Pal?
Hello Pal has several layers which makes it very useful for a large audience even though their needs might be slightly different. This is also a large part of why we think Hello Pal has a great chance of success.

Hello Pal was launched on Android in May 2015 and on IOS in November 2015. By June 1st (seven weeks ago) Hello Pal had more than 700,000 downloads from more than 100 countries without having been promoted at all. It’s amazing what word-to-mouth can do if the app is good, but imagine what could happen when the company soon starts to actively promote Hello Pal in order to expand the user base.

Hello Pal is a free social language learning app where phrase books, vocabulary lists, translation tools and an integrated social network all combined turns Hello Pal into a great language learning tool.

As a user, you don’t need to know a single word of Chinese, Russian, Thai and Spanish etc. in order to instantly communicate and make new friends. By using Hello Pal’s partner matching system, you can connect with people all over the world, without the barrier of not knowing their language. The best way to learn a new language is by speaking it and that’s exactly what Hello Pal will let you do.

The app is absolutely free and on top of the main Hello Pal app, there are also six separate phrase books available for downloading (Chinese, English, French, Spanish, Japanese and Korean).

hp_programmersProgrammers working in the offices of Hello Pal, Hangzhou, China.


Going forward from an investment perspective

We learned that Hello Pal has an average of 3,500 downloads/day and that number has been steady for months. Assuming that the growth continues in the same pace, roughly 105,000 new users are added every month. By end of August or early September Hello Pal should be able to have north of 1m downloads, an even more impressive milestone when one considers that this has been accomplished with little money spent on marketing.

In order for the company to start monetizing Hello Pal (creating revenue), we have asked around and the general opinion is that at least 2m users is required. If we assume that marketing efforts along with increased peer-to-peer recommendations speed up new downloads, that 2m mark could be accomplished 6-8 months down the road. It’s our opinion that once that 2m hurdle is achieved the investment risk is significantly lowered and if >3m downloads is reached, we may have a home-run on our hands.

When the 1m mark is reached it does not only give Hello Pal plenty of time to further develop the app, Hello Pal is also sending a clear message that they should be taken seriously.

Just five weeks ago, Hello Pal surprised us a bit when they were able to hire Daniel Kou as their Chief Technology Officer. For a small start-up to attract such a respected and experienced person as Daniel Kou is very impressive to us. Daniel’s experience ranges from app development, system architecture design and programming to project management and product design, and includes 8 years working at Huawei Technologies as Chief Architect of several key product lines.

daniel_kouHello Pal Appoints Former Huawei Chief Architect Daniel Kou as Chief Technology Officer.

In the picture above, Daniel Kou is presenting to us the next product coming out of Hello Pal, the Hello Pal Travel app. Out of the whole idea ‘Hello Pal’, the company intends to develop three apps; Hello Pal, HP Travel and HP Language Learning (we are not sure of the name yet).

The bottom line when developing social apps like Hello Pal is to get enough users to be able to monetize; implement in-app purchases such as translation services, stickers, games and much more. We have bought an initial position and we are prepared to be patient with your investment, but we will always be part of the possible trigger that when dealing with the internet and apps, things can explode overnight. As targets are reached and progress is made, risk is lowered and our investment should appreciate.

learn_travel_date

Paper
The only point we would like to make here is short and concise, Hello Pal is not a mining company in the need of 10-12 years and 200m to build a mine. Their cost structure with offices in the Ukraine, Hangzhou and Hong Kong is tight and we don’t see future financings as very dilutive. In fact, since we assume that most of the cash in future financings will go towards expanding the user base, this will be extremely accretive for shareholders.


Conclusion

Going back to the Introduction above:
“It’s mind-boggling how large the upside can be if Hello Pal turns out to be a success. We are not saying this will be the next Snapchat or Twitter, but Hello Pal most definately have all the components to reach its own level of success.”

We would like to add to that an even more important component, at least for the next 6-12 months before the app gets more established, and that is the participation of New Margin. Their presence provides Hello Pal with help to industry collaborations, secure future financings and in general provide their industry knowledge and expertise.

Our investment in Hello Pal is something that may require some patience on our part, which is not a problem for us. At the same time it’s an exciting feeling to know that a tech company like Hello Pal can virtually explode to the upside under the right circumstances.

 

Downloads

Gecko Podcast: Interview with Founder and CEO Mr. KL Wong

Hello Pal Investor Presentation (pdf)

Hello Pal News Releases

Hello Pal Quick Tour (YouTube)

Hello Pal Tutorial – The Basics (YouTube)

Hello Pal Tutorial 2 – Text and Voice Messaging in a Foreign Language (YouTube)

Hello Pal Tutorial 3 – Helping Your Pal When Receiving And Sending Messages (YouTube)
google_play app_store

hello_pal_banner

Hello Stranger: How Interacting With Strangers Is On The Rise

EIN Newsdesk, Nov 21, 2016

hallo_pal_app

Surging Social Media App Stocks Capitalize on Brazen Users.

While most of the internet is familiar with names like Mark Zuckerberg of Facebook [NASDAQ: FB], or Sergey Brin and Larry Page of Alphabet Inc. (or “Google”) [NASDAQ: GOOG], there’s a good chance that the next big names in software growth stories will come out of China.

It’s been a hot month for Chinese smartphone app developers, including for the messaging apps from Momo Inc. [NASDAQ: MOMO] and YY Inc. [NASDAQ: YY].

Boosted by a surge in popularity for both developers by Asian market users, both Momo and YY saw Credit Suisse initiate coverage on their companies with outperform ratings.

Momo in particular saw a record high $25.62 earlier this month, which was a doubling in price over the last two months. YY’s company Q2 year over year revenue had tripled, driven by the launch of its live video service in Q3 of last year.

Longer established YY has also seen gains, matching a 4-month high of $55.92 on September 2, and currently sitting comfortably at $54.48 prior to Monday’s market open. This is significantly higher from a summer low of $31 in late July.

While YY is more established, it’s Momo that’s got the steadiest momentum at the moment, and has already reached a milestone of nearly 70 million monthly active users.

Unlike internet giants Facebook and Twitter [NYSE: TWTR], Momo and YY allowed public traders in on the story at an earlier stage. Both Facebook and Twitter did most of their major growth as private companies, only opening the door to the public through major IPOs that were already at high-end established prices.

For investors looking to capitalize on social messaging app development, both Momo and YY are looking like they’re here to stay. Driven by a deep pool of heavy-users in Asian markets, it’s reasonable to believe that the next big app will come from this part of the world, instead of the West.

Momo the Chameleon

When it first came on the scene, Momo was looked at (somewhat incorrectly) as a mere hookup app. However, the app gained a lot of its traction through its diverse types of interactions.

For instance, users of Momo have branched into using the app for music recommendations, and to support local musicians. Fans of bands can help build a groundswell of popularity for new songs, or also to shower the bands with praise in the form of micro-gifting.

In fact, Momo gains a lot of its revenue from users buying each other digital gifts, like flower bouqets, and yachts. Whereas, North American users don’t typically make as many micro purchases, they’re more inclined to purchase upgrades, and spinoff software.

In the case of Momo, the company’s stock went on a steady 66% price uptick after the company introduced live video service. The rise was more a steady incline, rather than a day of spiking.

How did one upgrade to the app result in such a steady growth spurt?

Adding live video basically tripled the company’s revenue, accounting for $57.9 million of the company’s $99 million in revenue. Just the live video revenue alone in Q2 of this year was as big as the company’s total revenue in the first half of last year.

The Next Momo?

While Momo has been using its geolocation-based interaction advantage to compete with the WhatsApps and Facebook Messengers out there, the app is inherently limited by user proximity.

Steadily growing, but still at an earlier stage, is a somewhat competing app called Hello Pal: SPEAK TO THE WORLD by Hello Pal International Inc. [CSE: HP] [OTC: HLLPF] [Frankfurt: 27H.F].

Unlike Momo, Hello Pal is geared towards making connections outside of the user’s general vicinity. Instead of talking only to the people within blocks of you, now Hello Pal users can have real-time conversations with people in other countries, and in other languages.

Developed by President and CEO, KL Wong, Hello Pal encourages users to reach out to people all over the world, to make new connections, and pick up new languages along the way.

Wong’s had success with language software in the recent past, having developed the award-winning Brillkids program. Brillkids helped parents inspire their very young children to learn language skills like reading, as well as basic mathematics, all at a tender age.

Videos of Wong’s own daughter breezing through reading demonstrations, and solving math problems at a pace usually reserved for child prodigies. Now Wong and his team are bridging some of the basics of Brillkids into HelloPal’s language learning process, while incorporating more social messaging characteristics on top.

The app has so far been a near instant success, as it continues to grow and climb through the ranks of many online app stores.

HelloPal has grown quite rapidly, with new users signing on at a rate between 3,500 and 6,000 per day. It was impressive that it reached 670,000 users within its first year since launch, as recently as June of this year. It’s even more impressive that it’s nearly doubled that number in just two and half months to a recently announced total of more than 1.2 million as of mid-September.

Much like Momo’s live video capability was a boost to the already popular app, Hello Pal is set to release a complimentary program focused more on travelers with the upcoming Travel Pal spinoff. Given that the app already has highly capable voice recognition in place, real-time language help for travelers outside of their normal comfort zones will have their confidence boosted by the app in their pocket.

Get the Hello Pal App here.

http://tinyurl.com/gqy3652

Braden Macke
Hello Pal International
604 683-0911
email us here

Source

‘China on European shopping tour’: German minister warns of Beijing’s takeovers of EU companies

RT, Oct 29, 2016

china_germany_eu

German Economy Minister Sigmar Gabriel has urged the European Union to adopt a tougher approach with China, citing his concerns over Beijing gaining the West’s “strategically important key technologies.” He warned China’s WTO status was at stake.

“China itself is going on a shopping tour here with a long list of interesting companies – with the clear intention of acquiring strategically important key technologies,” the German official wrote in a guest column for Die Welt newspaper, as cited by Reuters.

The minister said the EU should review its policies towards the eastern trade partner, having accused Beijing of “foul play.” Gabriel claimed China obstructs direct investments into its companies from European partners and applies “discriminatory requirements” to foreign takeovers.

The German government can only block takeovers with potential risks to energy security, defense or financial stability, Reuters reported. The economy minister, who is also the country’s vice chancellor and leader of the Social Democratic Party, has curbed some latest takeovers of German technology companies by China.

Yet, so far in 2016, 47 deals worth a total of €10.3 billion ($11.3 billion) have been secured by Chinese investors “shopping” in Germany, according to Thomson Reuters data. The numbers show a steep increase from 2015, when 29 deals worth a combined €263 million were inked.

The trend has so disturbed the German official that he has warned Beijing might not gain important World Trade Organization (WTO) “market economy status.” China expects to be granted the status after its 15 years of WTO membership this year, but the German politician said in an interview with national media it “has to act accordingly.”

Source

Gold Imports by China Increase for First Time in Four Months

Bloomberg, Oct 27, 2016

Gold_Imports_China

* Worries over weakening yuan, property market may spur demand
* Swiss gold shipments to China rose by almost 80% in September

China, the world’s biggest gold consumer, raised bullion imports from Hong Kong in September for the first time in four months as investors sought to diversify their assets on prospects for a weakening yuan.

Net purchases were 44.9 metric tons from 41.9 tons in August and 96.6 tons in the same month last year, according to data from the Hong Kong Census and Statistics Department compiled by Bloomberg. The mainland bought 64.8 tons compared with 55.2 tons in August, while exports were 19.9 tons from 13.2 tons. Mainland China doesn’t publish the data.

The higher Chinese imports came in a month when global prices and holdings in gold-backed exchange-traded funds rose only 0.5 percent as investors weighed comments from Federal Reserve officials on a possible U.S. interest rate increase. Further weakness in China’s currency and investors’ concerns over the outlook for the nation’s property market may spur gold demand, according to Goldman Sachs Group Inc. 

The offshore yuan sank to a record this week as Chinese policy makers signaled they are willing to allow greater currency flexibility amid a slump in exports and rise in the greenback.

Shipments of gold from Switzerland to China increased to 35.5 tons last month from 19.9 tons in August while exports to Hong Kong declined to 11.5 tons from 24 tons, according to figures from the website of Swiss Federal Customs Administration. The European country is a major bullion-trading center and home to several refineries.

Source

China’s Economy Strengthened as Factory Output, Retail Perk Up

Bloomberg, Sep 13, 2016

* Rebound suggests July weakness was a blip, not fresh downturn
* Policy support has stabilized world’s second-biggest economy

China’s economy strengthened after July’s hiccup as factory output, investment and retail sales all exceeded economist estimates, amid a boost from property that’s added to concern that price gains may prove unsustainable.

Key Points

  • Industrial production rose 6.3 percent from a year earlier in August, compared with a median estimate of 6.2 percent in Bloomberg survey of economists
  • Retail sales climbed 10.6 percent last month, from 10.2 percent on July
  • Fixed-asset investment increased 8.1 percent in first eight months of the year

Big Picture

The reports add to other recent data that have helped shore up confidence in the world’s second-largest economy, including better-than-expected trade and the official factory gauge unexpectedly rising to the highest level in almost two years. One challenge is that the property market, which has underpinned the recovery, may face headwinds as the government signals that real estate price increases may be unsustainably high.

Economist Takeaways

“The economy seems quite stable, so they will not cut interest rates or the required reserve ratio because the current concern is on financial risks and the property bubble,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “You can front load future infrastructure demand to today for two or three years but you can’t do it forever. The whole economy is still adding leverage, especially in the property sector.”

“It’s a decent set of numbers and continues to reinforce the message of economic stabilization,” said Raymond Yeung, chief economist at Australia & New Zealand Banking Group in Hong Kong. “The government should be comfortable with the figures. The PBOC can now focus on structural reforms such as interest rate liberalization and simply maintain an accommodative environment in the money market.”

“The latest signs of stabilization in growth suggest policy will continue rotating toward addressing longer-term challenges,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note. “Further interest rate cuts are unlikely. Even cuts in the reserve-requirement ratio may be more than required, though they could come into play if capital outflows continue.”

“The delayed impact of earlier policy easing means that a stronger second half to this year is likely,” Julian Evans-Pritchard, economist at Capital Economics in Singapore wrote in a note. “With further monetary easing unlikely in the near-term, this uptick in economic activity is likely to fizzle out going into next year.”

“The production and investment data show that growth is stabilizing,” said David Dollar, a senior fellow at the Brookings Institution in Washington and former U.S. Treasury attache to Beijing. “They’re walking a fine line between enough stimulus to achieve 6.5 percent growth but not so much that risks build up alarmingly. If there’s too much of a rebound they will take away the punch bowl.”

The Details

  • Surveyed jobless rate edged up in August but stabilized around 5.1 percent, NBS spokesman says at briefing
  • Online retail sales climbed 26.7 percent this year through August
  • Crude steel output rises 3 percent in August from year earlier
  • Power output climbs 7.8 percent
  • Property development investment climbs 5.4 percent in January through August period
  • Home sales value rises 40.1 percent
  • Private investments in fixed assets rose 2.1 percent for a second-straight month, matching record low
  • Fixed investment in steel mining and oil and gas both fell more than 30 percent

Source