 Good day, fellow investors! I hope you feel great and today we are going to discuss my stock pick to buy in January 2018. The company is CQ. It is a Chinese luxury platform where they sell mostly European luxury items to the Chinese public online. So, we are going to discuss the Chinese online environment. So, it will be an interesting video for all of you who are interested to get exposure or are exposed to the environment, more in detail about the Chinese luxury sector and then of course the fundamentals and why I think CQ is a good investment. Just a quick note on CQ. It IPO'd in September at the price of 13, then the price dropped as it is common for Chinese IPOs to a low of below 8. However, recently the stock has been improving. Now it is at 11 but what's interesting is that there was a huge spike last week because someone or the internet was exploding how CQ will introduce blockchain into their offerings. However, of course the stock price has been a bit higher but I will not even comment this blockchain. It's just always a bonus to any stock because I think CQ is undervalued from a fundamental perspective, from a value perspective and whatever happens with the blockchain it can be only a positive. The current prices for the companies around 11, my fair valuation target price is 17. However, if CQ delivers on the expected growth, my target price would be also 40, 40. Depending on the valuation for a Chinese growth stock, a valuation of 30 isn't uncommon and then we see a price of 30 will you will see later in the fundamentals because I expect earnings of $1 in 2018. If that happens you can see a 200% increase on the investment. We will also discuss the risk so that you can see how much to allocate of your portfolio to this stock if you like it and if fits your personal risk reward appetite. The Chinese e-commerce environment is special for the following points. It's changing from a seller's market to a buyer's market so buyers really look what they are buying and are very picky about it and easily switch from a worse seller to a better seller. Large retailers are trying to expand their consumer base by expanding into everything from payments and creating a complete ecosystem. The focus is on digitalization and omnichanneling. The supply chain management is becoming the key to the competitiveness. Capital investments are still large and there is also the potential for cross-border selling so that's very very interesting. Global e-commerce market has been slowing down in growth but still very very fastly growing and getting a bigger bigger share of the global retail market. Chinese e-commerce growth was at 25% in 2017 will be slowing down however the market is expected to continue to grow for the foreseeable future and 20% rates are crazy and really enable that everybody wins in the market even if you are not that good. The penetration of online retail market is very very high in China the highest in the world. Asia Pacific a little bit less but North America and so on is following later. This is because China has had a later development where it's easier to do everything online. Further mobile is becoming the key in China so going from PC to mobile therefore the seller you invest in has to be very very good on mobile. What's very important also is the social media impact 31% of users initiate their purchases on WeChat so you have to be strong on WeChat in order to get to sales. Then the Chinese are rich and getting richer. Affluent upper middle class they are growing at an extremely fast rate. There will be much more available purchases. The market is growing growing and growing thanks to the economic growth and economic system that allows for many more rich than it was the case in the past. It is expected that the Chinese middle income and high income population hits 600 million by 2021 which is a huge market especially for luxury e-commerce retailer. Here you can see the Chinese retail e-commerce is really booming and having a huge huge part of growth in the past slowing down a little bit but it's still very very good. So what do we have to look when looking at Chinese e-commerce investment that the targets the middle class and the affluent that's where the growth is. Rural areas also where the growth is has a strong presence on WeChat and social media has a strong mobile presence has a profitable business model because growth if it's creating cash it's creating value. It is a potential target for the bigger players in their consolidation race. So CQ really fits this description because it offers buying diversification for customers in a buyers market that is growing. Thus there is plenty of room for more players in the sector to grow. If we look at the e-commerce platform for the upscale products CQ has 25% of the market. So you are investing in a Chinese market leader which is very very important. Or also CQ targets rural areas which are of the focus still of Alibaba and GDECOM especially for luxury goods. Now let's look at luxury e-commerce market and how CQ fits that environment. Here you have from Pariba really a very very good example of how you analyze a market. So I didn't do it because they do it. I just checked it seemed very okay. So CQ has a lot of brands more brands than JD's platform and they have been currently adding brands to their platform. CQ ranks excellently in the digital customer platform but they don't rank that good in the practical. So they are not that good on the retail spaces but they are investing in new showrooms that will combine the digital and the practical. Which is again part of the strategy to be omni-channeling. Something very important when looking at Chinese luxury is fake bags. For example here you have a fake bag that was sold on T-Mall from Alibaba which really makes all the people that look at what Alibaba is selling, JD, Tencent and so on really don't trust them. And CQ here has an advantage because CQ has really customer confidence. Another platform for example Yintai here it shows online how there have been issues with authenticity and everything is checked on WeChat and immediately affects negatively the seller. As said payment options what are the possible payment options CQ as you can see here has a very broad environment of payment options for China. What the company does you will get the best idea if you look at the YouTube link of the company it's three minutes so you can check that and you will understand what the company is. As said it's a luxury platform it had 300 000 active customers offers more than 300 000 product. Let's quickly look at the fundamentals the main case comes from the growth. Really the company has been growing revenue at 40% in the last quarter they expect the management expects to grow at 40% in the next quarter and why not even grow further in 2018. What's very important is that margins as the company is scaling continue to improve and in 2015 the net profit margin was negative 12% 2016 1.7% in 2017 it has been for 3.7% so we can really expect a significant improvement in net profit at 5% net profit margin would push seco to 0.72 in profits for 2018 while a 7% gross margin which shouldn't be impossible for 2018 would push earnings per share of one which according to a low valuation of 17 should make target price of 17. If we get to a valuation of 30 40 you can do the math yourself. What are the risks of course everything negative surrounding the company a scandal fraud or something like that can always shoot down and close down the especially in addy air on a new york stock exchange. Further if there is slowdown in china you can expect it to not do so well and generally the stock Chinese stock market if it does bad then seco will be affected. Further if there is no growth if they don't hit 40% but 20% if there is slowdown in growth then again the story completely changes and then you can see very very low prices so that's something you have to think about when investing in seco for now we have 40% growth market leader attractive to other perhaps someone will take it off going into high profitability really switching from negative as it is scaling to very positive growth growing good performance good authenticity checks so it's really a very very interesting stock thank you for watching i hope you like the investment hope it does well you never know and i'll see you in the next video