Kaixin Holdings · NASDAQ:KXIN
Kaixin — CM Seven Star Acquisition — SPAC Merger (December 2018)
28 slides from Kaixin's SPAC merger presentation, Dec 12, 2018
Slide 1: CM Seven Star Acquisition Corp. Business Combination with Kaixin Auto Group
CM Seven Star Acquisition Corp. Business Combination with Kaixin Auto Group Investor Presentation December 2018
Slide 2: Disclaimer: Forward-Looking Statements and Non-GAAP Measures
2 Disclaimer Important Notice Regarding Forward - Looking Statements and Non - GAAP Measures This presentation contains certain “forward - looking statements” within the meaning of the Securities Act of 1933 and the Securit ies Exchange Act of 1934, both as amended. Statements that are not historica
Slide 3: Disclaimer
3 Disclaimer (ix) the risk that the combined company may be unable to achieve cost - cutting synergies or it may take longer than expected to achieve those synergies; and (x) risks associated with the financing of the proposed transaction. A further list and descript ion of risks and uncertainties c
Slide 4: Disclaimer: Additional Information and Where to Find It
4 Disclaimer Additional Information and Where to Find It In connection with the transaction described herein, CMSS will file relevant materials with the Securities and Exchange Commi ssi on (the “SEC”), including a proxy statement on Schedule 14A. Promptly after filing its definitive proxy statement
Slide 5: Transaction Overview
5 Transaction Overview (1) CM Seven Star is sponsored by SVF, a Fund managed by CMAM, a wholly owned subsidiary of CMFH (2) As of September 30, 2018 (3) Does not include approximately 4.7 million shares reserved under a management equity incentive plan (“ESOP”), a portion of wh ich will be issued at
Slide 6: Transaction Rationale
Transaction Rationale 6 Exposure to Huge and Rapidly Growing Market 1 Focused on High Value Segment 2 Differentiated Business Model 3 Discounted Valuation to Comps 5 Earnouts Tied to Business and Stock Price Performance 6 Trust Proceeds to Fund Expansion 7 Experienced Management Team 4
Slide 7: The Chinese Used Car Market is in its Infancy
7 China has the second largest car parc and the highest new car sales in the world, but the used car market remains underpenetrated by comparison to the US market The Chinese Used Car Market is in its Infancy 1 China New and Used Car Sales (in millions of units) United States New and Used Car Sales
Slide 8: High Growth Market Poised to Accelerate
8 Source: China Automobile Dealers Association, Chinabaogao , iResearch . All data references passenger car only Note: Historical RMB figures converted to USD at the annual average exchange rate for their respective year. FX used for conv ert ing estimate RMB figures of 6.93 RMB/1.00 USD • Growing n
Slide 9: Focused on Highest Value Segment
Market Value Growth by Segment (in USD, billions) 2017 Chinese Used Car Market by City Period Growth 9 Focused on Highest Value Segment • Highest growth segment of market • Disproportionate value • Geographically concentrated with ability to profitably serve other markets with newly relaxed inter -
Slide 10: Differentiated Business Model
10 Differentiated Business Model • China’s used car market is huge and rapidly growing to become the largest in the world • Premium segment provides greatest growth in value and is concentrated in top markets • China’s used car market remains highly fragmented, with 80% of volume through mom & pops
Slide 11: Leading used car dealership for the premium segment
• Kaixin’s “internet gene” at core of network and big data to cross sell multiple high gross margin services • Provide consumer financing, insurance, and extended warranty products • Complete after - sale services increase revenue, margin and customer retention • Smaller dealerships affiliated withi
Slide 12: Transformed from a financing platform to a leading used car dealership network
Transformed from a financing platform to a leading used car dealership network Tech - enabled financing platform Self - owned dealer network expansion Affiliated dealer network expansion 2015 2017 2018 Business model Renren Fenqi • Obtained leasing, factoring license • Initiated dealer floor plan fi
Slide 13: Significant growth opportunities with current model
• Leverage network and data to innovate and provide extended services • Expand products and services to a wider customer base and enhance customer satisfaction and loyalty • Fragmented market with ~ 200 , 000 dealers nationwide • Addressable market for consolidation ~ 150 , 000 , mostly mom and pop
Slide 14: Creating a Strong Dealer Network
Model enables traditional car dealer intermediaries with technology, capital and brand, to expand and leverage their business 14 C hinese customers Creating a Strong Dealer Network Marketplace dealers Capital support Operation support Profit Sharing Premium car sourcing Volume expansion Risk sharing
Slide 15: Dealer selection process in a targeted city
Dealer selection process in a targeted city 2 3 Marketplace dealers • Connect with 50 - 200 dealers within each city through market coverage (e.g. floorplan financing, consumer auto loan, and insurance) • Obtain operational performance insight Large scale dealership partners • Select dealers with la
Slide 16: Affiliated dealership model to tackle car sourcing
Sourcing Inspection Reconditioning Storage Sales Affiliated dealership model to tackle car sourcing and increase KSOD revenue 16 Source: Management information Involved KAND dealers Performed by KSOD dealers • KAND dealers supply KSOD with premium used cars, enlarging KSOD premium used car coverage
Slide 17: Kaixin SaaS platform and market data analysis
Kaixin offers dealers access to SaaS management technology and market data analysis 17 SaaS Enabled Platform • Enhance dealers ’ management capabilities • Maintain central management over self - owned dealers Kaixin SaaS platform Inventory Sales Profile Management Financial Management Enterprise Man
Slide 18: Ecommerce platform and online community
Kaixin ’ s internet gene enhances the retail platform through its globally direct sales (SDR) engine and the development of a video online community for premium car owners 18 Ecommerce Platform 3 Customer acquisition flow Personalized News Feed based on Interest Real - time online help to find the r
Slide 19: VAASS Enhances Revenue, Customer Engagement
1 9 Number of loans originated and average loan size ( USD in thousands) VAASS Enhances Revenue, Customer Engagement Value Added Services – Financing and Insurance • Kaixin acts as market facilitator to originate consumer auto credit and insurance solutions on behalf of financial partners • Not invo
Slide 20: Management Team: Internet + Auto + Finance
20 Management Team: Internet + Auto + Finance Joseph Chen Chairman Chen Ji Chief Executive Officer Jun Ma Chief Technology O fficer Business Operations Capital Operations Support Operations Kai Wang Director Consumer Finance Li Cai Director Risk Management Jintao Yu Director Business Development Xia
Slide 21: Estimated Sources and Uses; Implied Initial Valuation
21 Estimated Sources and Uses ( 1,2 ) (in millions of USD) 1. RMB figures converted to USD at FX of 6.89 RMB/ 1.00 USD as of November 2 , 2018 2. Assumes no redemptions from trust proceeds 3. As of September 30 , 2018 4. Denotes approximately 4.7 million total shares reserved under a management equi
Slide 22: Comparable Valuation
22 Source: Capital IQ at close of November 2 , 2018 1 . Adjusted EBITDA for Kaixin Comparable Valuation TEV/Sales 5,6 TEV/EBITDA ( 1 ) N/A N/A
Slide 23: Key Metrics vs. Peers
Key Metrics China U.S. Kaixin Car King Guazi Uxin Carmax 1 Carvana TAM (2017 A) 9.3mn units / USD87bn 39.2mn units / USD 764bn Valuation USD454mn N/A N/A c.USD1.9bn c.USD25.9 bn c.USD7.2bn Car Revenue Recognition KSOD: Gross KAND: Net Gross Net Net Gross Gross Gross Merchandise Value (2017A) USD95mn
Slide 24: Key Operating & Financial Metrics
2 4 Units Sold (in units, thousands) Number of Dealers (in units) Revenues (in millions of USD) Gross Profit (in millions of USD) Adj. EBITDA (in millions of USD) Key Operating & Financial Metrics A verage U nit P rice (in thousands of USD) Source: Projections are based on m anagement budget and con
Slide 25: Near Term Revenue & Adj. EBITDA Growth
Adj. EBITDA (USD millions) 25 Near Term Revenue & Adj. EBITDA Growth Revenues (USD millions) Comments • Increase number of KAND locations • Higher volume sold per KSOD due to better sourcing from affiliates • Rollout of VAASS throughout the network Comments • Existing KSOD are maturing, turning cash
Slide 26: Dealership Unit Economics
26 Dealership Unit Economics KSOD (30) (20) (10) - 10 20 30 40 50 60 Y1 Y2 Y3 Y4 Y5 KSOD (with VAASS) Balance KSOD Balance (without VAASS) KAND (4) (3) (2) (1) - 1 2 3 4 Y1 Y2 Y3 Y4 Y5 KAND (with VAASS) Balance KAND Balance (without VAASS) Comments • Investment of ̴RMB$ 23 mn paid back in less than
Slide 27: Capital Expansion and Funding Pipeline
2 7 Capital Expansion and Funding Pipeline 2019 2020 2018 Total pipeline: RMB 2,250 million (USD 326.6 million) + USD 209 million 3 Channel A: 200 million Channel B: 200 million Channel C: 200 million Total: RMB 600 million (USD 87.1 million) Total: USD 209 million SPAC : 3 209 million Source: Manag
Slide 28: Investment Summary
Investment Summary 28 • Largest player in premium pre - owned car segment; significant and rapid growth potential in this industry • Highly scalable business model through “ Affiliate Network ” growth • Well positioned to capitalize on growth in large cities and also expand to smaller markets – goal
CM Seven Star Acquisition — SPAC Merger (December 2018) on 6ix