As of right now, VIE shareholders do not have "ownership" of underlying assets, only entitlement to "profits". Hence, my original post.
I have owned VIEs, and I only value them on potential future cash flow, that I assumed can be returned to shareholders at some point.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
As of right now, VIE shareholders do not have "ownership" of underlying assets, only entitlement to "profits". Hence, my original post.
I have owned VIEs, and I only value them on potential future cash flow, that I assumed can be returned to shareholders at some point.
Hi Wildream,
As mentioned, dont be too worried about vie. Tencent is a vie and it has been spining off assets to shareholders proportionately. Dividend ie cash assets are also distributed identically like common stocks. Vie structures like Sina are also privatised fairly like a common stock.
If tech coys in China are playing with two layers of shares it will be a worrying problem but they are not. Everyone even the founders, their employees and the chinese ppl are owning vie shares of prominient tech coys. Not only foreign retailers and funds, chinese funds like hillhouse and sequoia are also owning them.
Ant group spin off previously was also a positive intention from alibaba, shareholders of baba will get a portion or the inspecies of ant group if it were to go through, sadly it didnt. But what I am trying to show is that if a mgmt is opmi friendly be it common stock or vie, shareholders will get rewarded by waiting patient. If mgtment is stingy and un willing even a common stock will get trapped forever. Own view.
08-03-2022, 09:13 PM (This post was last modified: 08-03-2022, 09:24 PM by CY09.)
Talking about the super app on Grab's thread.
I chanced upon a "super app" that specializes and is trying to be the go-to for beauty products etc (tailored more for the beauty/fashion industry)
Its a joint venture between tencent and alibaba so it is pretty "regulatory friendly" Quite a popular app and is another one that has been successful in capturing a niche segment
(27-02-2022, 12:31 AM)CY09 Wrote: I recall somewhere i saw the valuation of China Unlisted Unicorns as of end 2021
Ant was valued at USD $150 billion, Alibaba cloud at US $120 billion, Cainiao is at US $50 billion.
Taking Alibaba's stakes and its cash/equity, it gives a value of 53+77+50+120+30= USD$330 billion.
The above main stakes total value is higher than its current market cap. This excludes its entire commerce division. Again valuation is subjective and should China tighten its rein on its tech companies, ANT and alibaba cloud valuations will head south
Alibaba has other valuable names as well such as Dingtalk which is the China equivalent of Slack (Slack is valued at about US$27 billion). The china commerce arm earns about RMB$180 billion per year (or about USD$28 billion). No doubt profits are falling, so lets keep it at 10x P/E. That's is $280 billion.
Eventual fair value of Alibaba is US$630 billion.
Hi CY09 u are right as published by lilian on substack, basing on lastest round, Ant Group has a 150bil usd valuation, Alicloud has a 124bil usd valuation, Cainao has a 30bil usd valuation. Indeed its core commerce is currently valued at zero by the market.
(27-02-2022, 12:31 AM)CY09 Wrote: I recall somewhere i saw the valuation of China Unlisted Unicorns as of end 2021
Ant was valued at USD $150 billion, Alibaba cloud at US $120 billion, Cainiao is at US $50 billion.
Taking Alibaba's stakes and its cash/equity, it gives a value of 53+77+50+120+30= USD$330 billion.
The above main stakes total value is higher than its current market cap. This excludes its entire commerce division. Again valuation is subjective and should China tighten its rein on its tech companies, ANT and alibaba cloud valuations will head south
Alibaba has other valuable names as well such as Dingtalk which is the China equivalent of Slack (Slack is valued at about US$27 billion). The china commerce arm earns about RMB$180 billion per year (or about USD$28 billion). No doubt profits are falling, so lets keep it at 10x P/E. That's is $280 billion.
Eventual fair value of Alibaba is US$630 billion.
Hi CY09 u are right as published by lilian on substack, basing on lastest round, Ant Group has a 150bil usd valuation, Alicloud has a 124bil usd valuation, Cainao has a 30bil usd valuation. Indeed its core commerce is currently valued at zero by the market.
Generally I find sum-of-the-parts valuation to be easily utilised by sales promoters / sell-side analysts to provide an easy and convenient justification for an exaggerated price.
The SOTP theory relies heavily on the assumption of efficient markets - being that the constituents/parts are also conservatively/efficiently priced by the market. But often these constituents/parts are overvalued by the market.
For example (in my view),
- Yihai Kerry Arawana (constituent of Wilmar) is surely overpriced.
- Yonghui (constituent of Dairy Farm) is surely overpriced.
Borrowing from the Grab Thread - what if other than Taobao/Tmall - all the other businesses of Ali (which are all loss-making) - are just storyline business - i.e. that they may never be viable businesses?
Another way to look at it is - what if all the other businesses of Ali are cost centres (never meant to be profitable) but are required to defend Taobao/Tmall against competition?
I do not believe that all the other businesses of Ali are worth zero. But I think market valuations of these businesses are too easy and loose (e.g. based on Price/sales). Their true valuations probably lies somewhere in the middle (between zero and loose valuations).
Having said the above, I am a fan of Ali and unfortunately vested at significantly higher prices than current.
I'm not a fan of SOTP unless you are a corporate raider or management that can make decisions to split the assets.
If there's a lemon in it, it's part of the package for the investor. And some assets are strategic in nature that yields little.
Say if there is a stock with 1 good asset and 1 bad asset each with capital $100 each that pays $10 for the former and -$10 for the latter. Does it mean it should be valued at $100 after attributing zero value for the bad asset? In addition the positive $10 cashflow is likely to fund the -$10 cashflow. So trick is what's the projection before the -$10 Asset turns breakeven
And this is just Asset layer of the A-B-S
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
12-03-2022, 08:45 AM (This post was last modified: 12-03-2022, 12:02 PM by CY09.)
In terms of business, Alibaba is being targeted by the communist party and behind the scenes, the party is trying to dismantle by imposing regulations on ANT and Cloud (the two with 270 bil valuation total) in favor of the pro-CCP companies such as Huawei, who is less tech developed.
Investors worldwide have found the experience painful when they were investing based on Alibaba's growth story in 2020/2021 and when then it was trading at 20+ to 30 P/E. The guise of "common prosperity" has also driven up cost as one area has been the increase in wages for delivery workers and other regulatory cost
To compound this, there is now an ADR issue where China does not want to share its audited accounts with American regulators (I have checked China is doing this only to USA, Singapore is not affected). A lot of this can be attributed to XJP's policies which seems weird because all he is doing is killing off the entrepreneurial spirit and as evident by China's data- new bank loans are falling a lot. When investing in China, one has to evaluate the factor of the CCP (repeating something I have said)
Since COVID, the track record of CCP led by President Xi has not been good where the authorities have not dealt with covid well with the initial onset of not communicating to the world early the presence of a virus to its continued city lock down 2 years on, which is sapping the energy of its very obedient albeit brainwashed populace. To add to that, his economic reforms, targeting equality, seems to be bringing his country to recession. He has since tried to consolidate power by elevating himself to the status of Mao Zedong and espouse his teaching (chairman's Mao ending wasn't good). his actions has led to a "XJP put" on all china companies
Without disrespect, just love it when investors or speculators viewing the company value only from Shareholders point of view.
It just shows how desperate and depressed the valuation of those companies are at the moment.
Shareholder is just one of the stakeholders.
Customers, Employees are even biggest stakeholders especially from quantity (and hence Gov priority?).
As a Taobao customer, am I affected? Don't think so, if any, it's for the better.
If those regulations ever applied to Shopee, Grab, Lazada and whatnot, as a customer, I'd be happier.
For majority of employees, imho, they'd be happier as well, at least reduce the chances of dying at work.
But, how cheap is the valuation? I don't really know, not an expert in High-Tech companies.
But, I do know:
At price of HKD 91, Alibaba market cap is about USD250B.
Amazon market cap is USD1500B.
Alibaba is priced at less than 17% of Amazon.
Even Tencent market cap of USD 451 is only 30% of Amazon's.
We are not even comparing them with Apple 2.5T & Microsoft 2.1T.
As a frequent eCommerce customer in Singapore:
I see myself buying a lot more from Taobao than Amazon Sg or US.
Why? Not even due to cheaper price, but more out of the varieties and value products offered.
I know Amazon cloud is far bigger and Ali Cloud hard to expand internationally.
But I reckon that is hardly due to technical issue, more like US is seen as great integrity image and China is fishy??
Ali Cloud can support the tremendous volume of 11.11, that tells a lot of their technical quality.
Put that aside, I don't think Alibaba is worth about 17% of Amazon.
Or maybe Amazon is too expensive?? No idea.
My views are your Gilbert & Sullivan's:
"The flowers that bloom in the spring, have nothing to do with the case".
The message from different parties in china seems not in sync. The words by the vice premier on 16 March differs from what is being done in April, it seems the crackdown continues. Starting to wonder if the words of the China Communist Government can be trusted.
Expect more tech crackdown and subsequent layoffs by Chinese companies. With more layoffs and lockdowns, it does seem the economy is grinding to negative growth due to the government policies. Chinese ADRs investors have to take note of declining growth and falling margins
The message from different parties in china seems not in sync. The words by the vice premier on 16 March differs from what is being done in April, it seems the crackdown continues. Starting to wonder if the words of the China Communist Government can be trusted.
Expect more tech crackdown and subsequent layoffs by Chinese companies. With more layoffs and lockdowns, it does seem the economy is grinding to negative growth due to the government policies. Chinese ADRs investors have to take note of declining growth and falling margins
I do not see that there is any significant conflict. Liu He's signaling of support doesn't mean giving companies a free rein and back to the earlier days. I see it as that the Chinese authorities have "blinked" and drawn a line in the sand to the extent that they will go in terms of cracking down.
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