Kaixin Holdings · NASDAQ:KXIN
Kaixin — CM Seven Star Acquisition — SPAC Merger (February 2019)
32 slides from Kaixin's SPAC merger presentation, Feb 20, 2019
Slide 1: Business Combination with Kaixin Auto Group Investor Presentation
CM Seven Star Acquisition Corp. Business Combination with Kaixin Auto Group Investor Presentation February 2019
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 Kaixin Auto Group A Leading Chinese Used Car Dealership Group owned by Renren, invested by Softbank CM Seven Star Acquisition Corp 1 USD 211mn in trust capital 2 Sing Wang is CEO and sponsored by a fund managed by a subsidiary of China Minsheng Financial Holding Corporation +
Slide 6: Additional Financing Summary
Additional Financing Summary 6 • In January 2019, CM Seven Star and Kaixin secured USD30.5 million of financing to fund Kaixin’s growth strategy • USD23mn convertible loan agreement from Kunlun Tech Limited x First tranche of the loan for USD20mn was funded into Kaixin in January 2019, and the remai
Slide 7: Transaction Rationale
Transaction Rationale 7 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 8: The Chinese Used Car Market is in its Infancy
8 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 9: High Growth Market Poised to Accelerate
9 Source: China Automobile Dealers Association, Chinabaogao , iResearch . All data references passenger car only; Historical RMB figures converted to USD at the annual average exchange rate for the ir respective year. FX used for converting estimate RMB figures of 6.93 RMB/1.00 USD • Growing new car
Slide 10: Focused on Highest Value Segment
Market Value Growth by Segment (in USD, billions) 2017 Chinese Used Car Market by City Period Growth 10 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 11: Differentiated Business Model
11 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 12: Business Model Overview: KSOD Network and Hub-and-Spoke Expansion
12 Business Model Overview 3 Kaixin’s KSOD Network and Hub - and - Spoke Expansion Model Self - Owned Dealer (KSOD) 1 Affiliated Network Dealer (KAND) 1 Successful and Fully Aligned entrepreneurs 70% Economics 30% Economics KSOD 20% Economics 20% Economics 20% Economics 20% Economics Smaller Regiona
Slide 13: • Kaixin’s “internet gene” at core of network to utilize big data to cross
• Kaixin’s “internet gene” at core of network to utilize big data to cross sell multiple high gross margin services • Currently offering focused on facilitating consumer financing to 500 + dealerships nationwide • Complete after - sales service ecosystem plan initiated in late 2018 covering insuranc
Slide 14: 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 & Jinkong • Obtained leasing, factoring license • Initiated dealer flo
Slide 15: 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 16: Creating a Strong Dealer Network
Model enables traditional car dealer intermediaries with technology, capital and brand, to expand and leverage their business 16 C hinese customers Creating a Strong Dealer Network Marketplace dealers Capital support Operation support Profit Sharing Premium car sourcing Volume expansion Risk sharing
Slide 17: Self-Owned Dealership Selection Process
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 18: Affiliated dealership model to tackle car sourcing
Sourcing Inspection Reconditioning Storage Sales Affiliated dealership model to tackle car sourcing and increase KSOD revenue 18 Involved KAND dealers Performed by KSOD dealers • KAND dealers supply KSOD with premium used cars, enlarging KSOD premium used car coverage and ensuring steady supply • KA
Slide 19: Kaixin offers dealers access to SaaS management technology and market data analysis
Kaixin offers dealers access to SaaS management technology and market data analysis 19 SaaS Enabled Platform • Enhance dealers’ management capabilities • Maintain central management over self - owned dealers Kaixin SaaS platform Inventory Sales Profile Management Financial Management Enterprise Mana
Slide 20: Ecommerce Platform and online video community
Kaixin’s internet gene enhances the retail platform through its globally direct sales (SDR) engine and the development of an online video community for premium car owners 20 Ecommerce Platform 3 Customer acquisition flow Personalized News Feed based on Interest Real - time online help to find the ri
Slide 21: VAASS Enhances Revenue, Customer Engagement
21 Number of loans originated and average loan size ( USD’ 000 ) 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 involved in
Slide 22: Management Team: Internet + Auto + Finance
22 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 23: Estimated Sources and Uses
23 Estimated Sources and Uses 1 , 2 ( USDmn ) 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. Trust amount as of September 30 , 2018 plus $ 0.10 per share funded in January 24 , 2019 to extend the period to consumma
Slide 24: Comparable Valuation
1.5x 1.3x 1.5x 0.8x 0.9x 1.2x 1.0x 0.7x 1.4x 1.1x - 0.5x 1.0x 1.5x 2.0x Uxin Carmax Carvana Kaixin 24 Comparable Valuation TEV/Sales TEV/EBITDA 2 Source: Capital IQ at close of February 8 , 2019 1. Includes total number of Class A and Class B common stock outstanding 2. Adjusted EBITDA for Kaixin 1
Slide 25: Key Metrics
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 Enterprise Value USD453mn N/A N/A USD1.1bn USD24.2 bn USD5.5bn 2 Car Revenue Recognition KSOD: Gross KAND: Net Gross Net Net Gross Gross Gross Merchandise Value (2017A) USD9
Slide 26: Key Operating & Financial Metrics
2 6 Units Sold (in units, thousands) Number of Dealers (in units) Revenues ( USDmn ) Gross Profit ( USD mn ) Adj. EBITDA ( USD mn ) Key Operating & Financial Metrics 1 A verage U nit P rice (in USD ’ 000 ) Source: Projections are based on management budget and converted to USD at the exchange rate o
Slide 27: Near Term Revenue & EBITDA Growth
EBITDA 27 Near Term Revenue & EBITDA Growth Revenues 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 flow positive • Significant margin from
Slide 28: Indicative Current Unit Economics and ROIC
28 Indicative Current Unit Economics and ROIC 1 Source : Management information 1. Indicative ROIC calculation does not include interest, tax and corporate overhead allocated from the Kaixin group level, nor does it consider the leverage effect from capital contribution of bank debt financing 2. Ass
Slide 29: Dealership Investment and Return
(4) (3) (2) (1) - 1 2 3 4 Y1 Y2 Y3 Y4 Y5 Balance with VAASS Balance without VAASS 29 Dealership Investment and Return 1,2 KSOD KAND Comments • Investment of ̴RMB 40 mn (~USD 5.8 mn) with payback period less than 3 years • 5 years to reach maturity growth • Cash flow positive since year 1 with ROIC o
Slide 30: Case Study: KSOD & KAND
0.5 2.7 5.5 6.1 Jun-17 17H2 18H1 18H2 KAND – Wuhan 30 Case Study: KSOD & KAND KSOD – Chongqing Comments • Since Kaixin acquired the dealership, this KSOD quickly expanded its outlets from 1 to 3 thanks to Kaixin’s capital support and the full implementation of the SaaS with its big data analytics •
Slide 31: Capital Expansion and Funding Pipeline
31 Capital Expansion and Funding Pipeline 2019 2020 2018 Total pipeline: RMB 2 , 170 mn (USD 314.9 mn) + USD 209 mn 3 Channel A: RMB 200 mn Channel B: RMB 200mn Channel C: RMB 200 mn Total: RMB 600 mn (USD 87.1 mn) Total: USD 209 mn SPAC: 3 USD 209 mn Source: Management information based on assumpti
Slide 32: Investment Summary
Investment Summary 32 • 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 t
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