Transforming Qian Xun adds polish to new business with crypto cachet

The advertising services company is allowing users to settle payments for its newer business in used gadget trading using stablecoins

Key Takeaways:

• Qian Xun has unveiled PayKet, allowing users to settle payments on its platform with stablecoins, as it shifts away from its previous main business in advertising services
• In September, the company also bought a fintech company to develop new products and services based on blockchain technology.

By Warren Yang

Qian Xun Technology Ltd. (1640.HK) is the latest in a new generation of listed Chinese companies transitioning to new businesses, often dropping yesterday’s news for the latest flavor of the moment. In this case, the company evidently believes its future lies in applications using virtual currencies.

Last Friday, Qian Xun, which is transforming into an e-commerce platform operator from its older advertising services business, provided the latest evidence of its new strategic direction by unveiling a new payments service. Called PayKet, the service is primarily for settlements of cross-border payments for trading in second-hand mobile phones using stablecoins, which are cryptocurrencies pegged to real-life assets like the U.S. dollar. The product also offers some features that make supply chain finance easier, as well as digital-money wallet functions.

Cryptocurrencies are banned in China, where Qian Xun is based. But Hong Kong has embraced them, especially stablecoins, which are less speculative and, like their name implies, are meant to be more stable in value. Hong Kong launched a stablecoin regulatory regime in August, and it’s quite likely that’s where PayKet’s services are based.

The PayKet rollout comes just three months after Qian Xun agreed to buy Punkcode Technology, a Web3 fintech company founded by Tencent alumni, for HK$25 million ($3.2 million) to develop new products and services based on blockchain technology.

Qian Xun is exploring use cases for cryptocurrencies in real-life transactions as it shifts its focus to e-commerce from advertising, following another acquisition last year of a platform for online trading of used computers and other electronic devices. As it made the shift, the company changed to its current name from Ruicheng (China) Media Group Ltd. early this year.

The company’s revenue soared 10-fold year-on-year to 647 million yuan ($92 million) in the first half of this year, fueled by its new e-commerce business, even as its advertising revenue shrank. The e-commerce segment dragged down Qian Xu’s gross margin a bit during the latest six-month period. Its net profit growth matched its revenue surge, though that was thanks to non-operational factors, mostly gains from the disposal of a subsidiary. More encouragingly, the first-half results put the company on track to record its first annual net profit in years. 

Cross-border trade

A major benefit of stablecoins and other cryptocurrencies is that transaction settlements are almost instantaneous and less costly than using country-issued currencies like the U.S. dollar or Chinese yuan. Qian Xun says that will help minimize “pain points” in cross-border payments. Stablecoins were already used for $46 trillion of transactions in the past year, according to an October report from a16z crypto, a venture capital fund that invests in crypto startups.

Qian Xun handles overseas sales of more than 1 million mobile devices annually, so the user base for PayKet may grow relatively quickly. PayKet isn’t limited to settlements of payments for trading of used mobile phones. The company plans to expand product categories to cover all “3Cs,” namely, computers, communications devices and consumer electronics.

Qian Xun is using Payket not only for payment settlements, but also as part of a move into supply chain finance. Emerging technologies like blockchain and AI can make a big difference in this type of financing activity by expediting processes, providing better transparency and managing risk more effectively.

By integrating its self-developed internet of things (IoT) smart warehousing technology and an AI model for price predictions, PayKet provides credit intermediary services for supply chain finance. Plus, it digitizes inventory goods and combines them with smart contracts, or digital contracts stored on blockchain networks. Customers can use idle funds on the platform for wealth management functions as well.

In its announcement of PayKet, the company touted that the product’s rollout marks an upgrade of the company to a fintech services provider for digital currencies. It also marks an important step in the product’s journey to become a “Caifutong for cross-border trade,” it said, referring to Tencent’s cross-border payment service.

PayKet will ultimately bring new revenue to Qian Xun in the form of fees for the various services it provides, and will also help to accelerate the company’s nascent transformation from an advertising services provider. Qian Xun decided to make that shift as customers for its older advertising services curb their marketing spending amid China’s prolonged economic slowdown, pressuring the company’s older core business. As that happened, Qian Xun lost money in each of the three years through 2024.

At the same time, weak economic conditions, both in China and many other countries around the world, mean a growing number of consumers may opt for used gadgets, instead of splurging on new ones, giving a boost to demand for Qian Xun’s services. That growing acceptance, helped by advances in standardization and refurbishment capabilities, have helped to lift a new generation of Chinese electronics recycling specialists like U.S.-listed ATRenew (RERE.US) and ShanH, which has filed to list in Hong Kong.

To develop new services for second-hand device trading, both in China and overseas, Qian Xun raised about HK$300 million by issuing convertible bonds in February.

Investors seem to like where Qian Xun is headed, pushing the company’s shares up by a quarter this year. They still trade at a relatively modest price-to-sales (P/S) ratio of 2, but that’s well above 0.2 for Hong Kong-listed shares of e-commerce giant JD.com (JD.US; 9618.HK) and 0.5 for ATRenew. It’s also ahead of the 0.8 for Cango (CANG.US), which has undergone its own recent crypto transformation from a car trader to bitcoin miner and high performance computing (HPC) center operator.

The valuation gap suggests that investors believe Qian Xun’s focus on relatively affordable used electronic products can work well in the current economic environment. They also probably like its move into cutting-edge financial services using blockchain and AI. If the company can lure more consumers through the convenience of settlements using cryptocurrencies, it would mark another step in the right direction that could give its stock price more upside.

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