JMU Limited (NASDAQ: JMU) currently operates China’s leading B2B online e-commerce platform that provides integrated services to suppliers and customers in the catering industry. With the help of Internet and cloud technologies, JMU has the vision to reshape the procurement and distribution pattern and build a fair business ecosystem in the catering industry in China. JMU keeps concentrating on its ready-to-cook and ready-to-eat products in China.
Through cooperation with national and local industry associations and popular restaurant groups across China, JMU has formed a leading industrial alliance and has an excellent resource to leverage in China’s catering industry. JMU works very closely with its suppliers and customers in the catering industry, providing one-stop procurement services, as well as several other value-added services.
As of September 30, JMU’s B2B online platform recorded gross billings of RMB 3,194 million (US$479 million), 33,214 active customer accounts and 14,094 third-party sellers.
The company’ goal and strategies over the near to medium term:
- One of the JMU’ key business strategy is to improve the awareness of its new product or new food material and to get good publishing with OEM manufactures and to improve the slide change of its new products.
- The management is aggressively working onto improve the slide change and including warehouse management because most of the company’s products require temperature with the low temporary requirement.
- Furthermore, JMU continues to outline and combine its online and offline marketing strategies. This involves product awareness and collective market feedback for future product improvements. R&D of the company’ new products is a core competence for its key drivers.
- Diligently improve profitability, not just by redesigning the product for the volume but also through optimizing the internal covenant structure and the control.
- JMU’ improved integral covenant structure both in the online and offline sale, leading to boost of its RTC and RTE product.
- The company is strategizing to establish its leading B2B online e-commerce platform that provides integrated and efficient business solutions for customers.
The company’ business and marketing profile leverage on:
- Its continuing effort, in the development of its ready-to-cook or RTC and ready-to-eat or RTE product.
- Widespread product profile and continued innovation for the restaurant industry in China
- Management’ focus on condensing its direct sales SKUs. JMU currently trade on higher margin products.
- It’s Prudent risk management policies and efficient working capital management.
Robust Third Quarter 2018 business and financial Performance: As the company is focusing on the development of its ready-to-cook and ready-to-eat products, the company continues to report yet another quarter of revenue growth as customer acceptance continues to grow in PRC.
Furthermore, JMU optimized its operating structure by cooperating with source suppliers for its ready-to-cook and ready-to-eat products, which decreased the number of intermediaries and reduced related expenses, resulting in a 64.1% decrease in its operating expenses year over year.
Key highlights of 3rd Quarter:
- Revenues in the third quarter of 2018 were US$28.7 million, representing an increase of 5.6% from US$27.1 million in the third quarter of 2017.
- Gross profit was US$401.1 thousand in the third quarter of 2018, representing an increase of 166.3% from US$150.6 thousand in the third quarter of 2017.
- B2B online platform recorded gross billing of RMB 2,615 million (US$381 million) in the third quarter of 2018, measured in terms of gross merchandise value (“GMV”), decreasing 51.5% from gross billing of RMB5,391 million (US$810 million) in the third quarter of 2017, which was mainly due to the Company’s focus on ready-to-cook and ready-to-eat products development.
- Active customer accounts were 32,314 as of September 30, 2018, decreasing 1.4% from 32,775 as of September 30, 2017.
- Third-party sellers on the Company’s online marketplace decreased to 13,646 compared to 14,364 as of September 30, 2017.
Promising Outlook over the near to medium term:
- As per management, the upcoming quarters will have relatively better financial performance, since the order volume is expected to increase due to year-end celebrations and traditional Chinese holidays. JMU continues to optimize its products and introduce new products to meet customer demand and is also benefiting from broader brand recognition from its increased number of tasting events.
- Meanwhile, the company will also keep improving its operational efficiency to serve its customers better and expanding its market share in key areas. Moreover, JMU is also committed to establishing a sustainable growth path that can help the company achieve profitability and benefit its shareholders.
- Revenues were US$28.7 million for the third quarter of 2018, representing an increase of 5.6% from US$27.1 million in the third quarter of 2017. The growth of revenue in the third quarter of 2018 was mainly due to the increase in order volume.
- Cost of revenues was US$28.3 million for the third quarter of 2018, showing an increase of 4.7% from US$27.0 million in the third quarter of 2017, which was generally in-line with the growth of the Company’s revenues.
- Gross profit for the third quarter of 2018 was US$401.1 thousand, representing a 166.3% increase from US$150.6 thousand in the third quarter of 2017.
- Loss from operations in the third quarter of 2018 was US$1.4 million, showing a decrease of 71.3% from US$4.9 million in the third quarter of 2017.
- Liquidity and financial flexibility: As of September 30, 2018, the Company’s cash and cash equivalents were US$9.9 million, showing an increase of 101.8% from US$4.9 million as of December 31, 2017. Total shareholders’ equity was US$20.3 million as compared to US$103.5 million at the end of 2017, which was mainly due to the impairment of US$73.8 million provided for goodwill and acquired intangible assets in total during the first nine month of 2018.
Key risk factors and potential stock drivers:
- Company’ ability to strategically develop its higher margin new food material initiatives in the remaining quarters of 2018
- Exposure to intense competition leading to constrained profitability
- Company’s ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements.
- On Wednesday, March 6th, 2019, JMU was at $2.50 on an above average volume of 1.1M shares exchanging hands. Market capitalization is $21.569 million. The current RSI is 82.07
- In the past 52 weeks, shares of JMU have traded as low as $0.42 and as high as $11.90
- At $2.50, shares of JMU are trading above its 50-day moving average (MA) at $0.86 and above its 200-day moving average (MA) at $1.85
- The present support and resistance levels for the stock are at $1.78 & $3.82 respectively.
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