On Friday (July 26th), Oriental Selection's stock price fell more than 23%, closing at HKD 9.5.

In the news, Oriental Selection announced the departure of its famous anchor Dong Yuhui the night before.

In the announcement, Oriental Selection said that Dong Yuhui has decided to formally leave the company on July 25, 2024 after friendly discussions with the Group. The reasons for the departure are related to Dong Yuhui's career aspirations, commitment to his other endeavors and personal schedule.

The announcement stated that in addition to fully paying the promised benefits and compensation to Dong Yuhui, Chairman of the Board Yu Minhong, Dong Yuhui has sought approval from the Board and the Board's Remuneration Committee to distribute all remaining undistributed profits of "Time with YuHui" to Dong Yuhui.

The full name of Time with YuHui is Time with YuHui (Beijing) Technology Co., Ltd, which is a merged affiliated entity of Oriental Selection. That is to say, Oriental Selection sold Time with YuHui to Dong Yuhui for approximately 76.59 million yuan. In addition, in order to maintain the normal operation of Time with YuHui, Oriental Selection has stated that it will provide Time with YuHui with a self-developed information system for free.

Oriental Selection believes that the Time with YuHui brand is closely linked to Dong Yuhui's personal intellectual property, and it will be difficult for Dong Yuhui to continue operating after his resignation. Selling it is in the best interests of the company and shareholders.

Subsequently, Yu Minhong stated on social media that he had arranged the money for Dong Yuhui to buy the company, and the company was given to Dong Yuhui.

Oriental Selection Completely "De-Dong Yuhui"

Since the small essay incident at the end of last year, although the superficial harmony between Oriental Selection and Tung Yu Fai is still maintained, the speculation about the disagreement between the two parties has not stopped. So far this year, Oriental Selection's share price has been tumbling due to the news of their disagreement, with a cumulative drop of about 65% this year.

With the departure of Dong Yuhui, this matter is finally boots on the ground, there is an end.

However, after this "separation", Oriental Selection will be completely "de-Dong Yuhui". The impact on Oriental Selection is not insignificant. Although Oriental Selection said the company will reallocate resources to strengthen its own brand building, expand its own products and live e-commerce business. However, Dong Yuhui is Oriental Selection's most well-known and most trafficked anchor, and his departure has triggered market concerns about Oriental Selection's subsequent operations.

Judging from the major brokerage firms' comments on the incident, analysts expect the event to have a greater impact on Oriental Selection in the short term, but it could be a good thing for Oriental Selection in the long term.

In a report, JPMorgan said the departure of Oriental Selection web anchor Dong Yuhui, who accounted for a major portion of Oriental Selection's total merchandise volume, will have a very significant impact.

JP Morgan estimates that Time with YuHui accounted for half of Oriental Selection's total merchandise volume in recent quarters. The bank noted that it would not be surprised if Oriental Selection struggles to make a profit in the future, meaning it may need to remove about 10% of consolidated operating profit and about 5% of net profit from its forecasts.

In its report, CBI made a prediction on Time with YuHui's financials. The bank puts Time with YuHui's merchandise turnover (GMV) at about 3.5 billion (RMB, same below) from its opening in January 2024 to June 30, with a revenue contribution of about $410 million at a 13% commission rate and a profit of about $140 million, for a profit margin of 33%.

Excluding Time with YuHui's contribution, Oriental Selection's FY2025 GMV, revenue and profit are expected to decline by 34%, 9% and more than 20%, CBI said. The sale of Time with YuHui will have an impact on the company's short-term financial performance, but the risk of public opinion may be reduced, and the management can focus on the development of self-supporting strategy and the development of multiple platforms after stabilization, which may lead to stable operations in the long term.

According to Citi, Oriental Selection's actions in response to Dong Yuhui's departure are a key step in the company's strategic transformation, showing that it is committed to reducing its reliance on celebrity anchors, streamlining operations and focusing on sustained value creation from its self-managed products, which now account for about 50 percent of total GMV.

UBS also said in a report that it noted that investors have long been concerned about the possibility of Dong Yuhui's departure, and that it believes the development will likely be the last piece of bad news for Oriental Selection, if we set aside the negative sensitivities it will have on fiscal 2025.

Can Dong Yuhui take the lead?

For Dong Yuhui, after his breakup with Oriental Selection, the sky is the limit for him. But at the same time, Dong Yuhui has also attracted a lot of controversy because of his high reputation.

In February this year, Dong Yuhui in the live broadcast repeatedly refused to explain the underwear and other products, has triggered part of the controversy. Consumers in the live broadcasting room thought that Dong Yuhui, as an anchor with goods, did not fulfill his obligation to explain the goods.

With the fermentation of public opinion, Dong Yuhui also because of this matter on the microblogging hot search by more people to discuss. Dong YuHui's response to this is to directly empty the microblogging, which triggered more netizens indignation, calling Dong YuHui "floating".

In addition, Time with YuHui has developed a new style of live broadcasting this year, which is to go to various cultural and tourism attractions to broadcast live, and then utilize the popularity of Dong YuHui to promote the products and cultural and tourism resources of various places. But this approach has also sparked a lot of controversy.

In April this year, Dong Yuhui live in the Henan Museum caused other normal reservation of tourists can not enter the museum, triggering the dissatisfaction of tourists.

In June this year, Dong Yuhui in Shanxi Yongle Palace live shooting mural in the temple triggered netizens to question. Because it has always been forbidden for tourists to take photos inside the Yongle Palace, Dong Yuhui's exception made many people feel dissatisfied. Although the relevant departments later said that this matter was approved by the higher authorities, but netizens still think that this move is inappropriate, because in the need to protect the cultural and tourism venues inside the live broadcast may have an unpredictable impact on cultural relics.

There are a lot of things like this, and therefore, Dong Yuhui appeared on the live broadcast of this matter has a reverse psychology. Last month, Dong Yuhui said in a program, he is very resistant to selling things, and to this day do not enjoy the work of the anchor with goods.

Since the Time with YuHui brand is highly tied to Dong YuHui personally, all this negative press may pose a challenge to Time with YuHui's subsequent operations.

However, after all, Dong YuHui belongs to the head netizens in the live broadcasting field, and even if he comes out to work alone, he is still very strong. On Jitterbit alone, Dong has more than 26 million followers, and Time with YuHui has nearly 22 million. For comparison, Oriental Selection's Jitterbit account has over 29 million followers.

Although the number of followers is slightly lower, Dong YuHui's ability to bring in goods is able to overwhelm Oriental Selection. According to Feigua data, Time with YuHui ranked second with 533 million yuan in sales in May on the Shake Hands list, while Oriental Selection ranked sixth. This shows that Dong YuHui's fundamentals are so solid that one person can challenge all of Oriental Selection's anchors.

As Dong YuHui and Oriental Selection "break up", the subsequent development of the two sides will be based on their own skills, who will lose and who will win, it is still to be tested by time.