How to value Bubble Mart?

The listing of Bubble Mart in Hong Kong and its valuation seem to have become a phenomenon-level problem in the investment community.

This time we can also talk about the issue of company valuation on this hot spot. Of course, the reason that inspired me to talk about Bubble Mart is that the company’s recent public opinion articles are too vulgar-even if it is smeared and powdered, can it? A little more elegant?

As for what I am going to say to them, you can probably guess it-I always play the role of spitting at others in a champagne glass-this company that sells dolls in blind boxes has a PE of 200 on the first day of listing. Times. This is too difficult to understand.

Just talk about the company, don’t use the “young” label, this is stupid
However, as a “conservative” investor (pay attention to the word “conservative”, there is a quiz about this word at the end of the article), before discussing the valuation of companies like Bubble Mart, it is best to take a slice to prevent anger Of medicine. Because it is very likely that when talking about how much Bubble Mart is worth, the other person just looks at the wrinkles on your face, and then says, “You don’t understand young people…”, and then walk away grinning.

When a middle-aged person hears this sentence, he will feel that the truth is on his side. If he does not take the medicine to prevent anger, a phenomenon of crowded expression will appear, that is, there are too many words to say and the logic is a bit complicated, but for a while Speechless. In this way, the grinning guy has gone far.

This is half a joke, there is no medicine that can prevent people from getting angry and is good for expression. However, I have met two such grinning discussants recently, and one of them is said to be 37 years old, but he still wants “you don’t understand us young people…”. I really wanted to remind him of the fact that hair loss was 5 times worse than mine.

“You don’t understand young people…” This statement is very similar to the “preference” in behavioral science. For example, seeing a guy on the side of the road holding a bucket of urine into his mouth, which is difficult to explain, and then behaviorists say this is the person’s “preference”. The difference between “you don’t understand young people…” and “preferences” is that investors’ baskets are filled with various companies and industries whose valuations are incomprehensibly high. And the label “you don’t understand young people…” is more effective than “preference” because it is a bit like “visible to smart people.” Saying this can not only appear open-minded and far-sighted, but also make people with different opinions embarrassed to ask.

However, investors only need to use their brains to find that it is just an echo of the current trendy atmosphere.

I read several articles commenting on the valuation of Bubble Mart from the perspective of “young people” and “new gadgets”, and found that these articles are divided into two categories. One category is almost just chanting slogans, basically without any content; the other category, they say what the living conditions of young people are like, and then deduced from their living conditions why they buy blind boxes.

The latter statement seems reasonable, but it is logically bad. Because even if the reasons are correct, it actually describes the necessary conditions for the popularity of Bubble Mart recently, not the sufficient conditions. In other words, even if young people are as described in the article, why do they have to buy Bubble Mart? There are many similar things.

What is the difference between Moutai and Bubble
To be honest, Bubble Mart’s pop dolls are well-designed, and my daughter also likes Molly (she is 3 years old), but this kind of like can’t support Bubble Mart’s high valuation.

Some people compare the addictiveness of pop doll fans to the obsession of Maotai by alcohol lovers. The market value of Moutai can reach 2 trillion yuan. Is there so much room for bubble Mart’s valuation to rise?

I advise you to be a conservative investor. This is also the difference between a mature investor and ordinary people.

Products that make buyers addicted will indeed increase the profit margin of the product and people’s loyalty to the product, but it has to be said that Moutai’s addictive is different from Bubble Mart. This is a physical hygiene problem.

How do people become addicted to the intake of tobacco, alcohol, coffee, drugs, etc.? It is because the caffeine contained in the intake combines with the morphine receptors in the body, which makes people feel happy. And this kind of pleasure has marginal incremental demand, that is, people always hope that this feeling will gradually increase. What it shows is that if you don’t do external force control, the more people who drink, the higher the degree of alcohol, and the people who smoke or take drugs will gradually increase the frequency of smoking.

And another type of addiction-people are also addicted to things like toys and games, but this type of addiction will quickly reach a peak and then quickly decrease. The manifestation in people’s lives is that children will ask you for new toys after a period of time, and the frequency of sex between couples will also decrease with the increase in the number of years of marriage. To like the new and dislike the old is a human nature that is difficult to change.

Consumers of a certain brand of alcohol will increase their dependence on the brand as the consumption time increases, but products such as pop dolls are just the opposite.

There is another proof that pop dolls cannot be compared with Moutai, that is, investors can look at the second-hand market of Moutai and the second-hand market of dolls—the second-hand market mentioned here refers to the transfer between buyers after purchasing products from manufacturers and merchants market.

I checked the price of pop dolls on second-hand commodity trading platforms such as Xianyu, and most of them are lower than the price of pop dolls in first-hand stores. The second-hand price of Moutai is much higher than the first-hand price and the retail price, and as the purchase period increases, the price will increase greatly-of course, this has a certain relationship with people’s perception of the value of Chen Fangjiu.

However, the second-hand price of the product may well show that Moutai supporters agree with the value of Moutai products themselves-the things contained in it are a bit complicated and cultural. Of course, it can be completely attributed to Moutai’s brand value. But fans of pop dolls may not like Molly as much as they seem on the surface. Some of them may just be addicted to the blind box sales method.

Whether you like Jasmine or the blind box sales method, it seems similar in the short term from the Bubble Mart report, but the long-term difference is very large. Because the sales method of blind boxes is easier to imitate, it has almost no moat compared to IP.

New stuff? Actually not new at all
The favorite phrase used by investment analysts is “nothing new under the sun”. Things like pop dolls that are said to be incomprehensible to middle-aged people are actually nothing new. The life of many similar predecessor companies is not as good as expected.

Among them, Japan’s Bandai Toy Company has been selling dolls at the time in the form of gashapon since 1977, which is very similar to the blind box method. After decades of struggle, in the early 2000s, Bandai occupied more than 50% of the Japanese gashapon market, but at the same time fell into a financial quagmire. Later, they merged with Namco Co., hoping to achieve synergies, but their highest valuation in the last 10 years has only increased by about 40 times.

If you think that the Japanese market is a bit different from the Chinese market due to the saturation of the economy, then let’s talk about an American company—Funko, which is simply a replica of Bubble Mart.

From 2016 to 2018, Funko’s pop dolls were very popular, and the company also IPO in October 2017. This time was chosen very well. In 2018, the company’s performance increased 4.2 times over the previous year. But even so, Funko’s highest valuation is only half of Bubble Mart.

In 2019, a miraculous phenomenon appeared. Fun ko began to lose money in the fourth quarter, and this loss has continued throughout 2020.

Don’t get me wrong, the company’s losses have nothing to do with the epidemic. It went from prosperity to decline so quickly. The company’s explanation is that the price of outsourcing IP is too expensive, and it cost nearly 3 billion yuan in 2019. The real and more terrible reason is that consumers love the new and dislike the old at speed and fierce market competition.

In fact, a company like Bubble Mart that sells dolls with addictive properties has inherent operational contradictions. We can call it a productivity dilemma-if the number of dolls issued by the company is too large, it will be a bit like the government issuing excessive paper money. Inflation and lack of scarcity will reduce the loyalty of fans; there are few products and it is easy for competitors to grab market share. This rhythm is very difficult to grasp. In this case, similar companies often choose to go the first way, earning money first. This is also an important reason why they always flash by like meteors.

By the way, there is a quiz-do you have a negative impression of the word “conservative”?

If so, this is normal and can probably be regarded as the result of the propaganda work in the past decades of reform and opening up. However, conservative should be a neutral term in many fields, and in investment, it is even praiseworthy. Perhaps it is more acceptable for you to replace it with the “cautious” of accounting.

In the era of so-called growth scarcity, I advise you to be a conservative investor. This is also the difference between a mature investor and ordinary people.