Alibaba

[weijian]

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[karlmarx]

After cracking down for almost a year now, I'm quite convinced that most of the action stems from CCP's desire to maintain control and influence. The official rhetoric that some of their actions are to manage social problems (e.g. pressure from education expectations, inequality) is not different from their desire to maintain control and influence; you won't win the hearts of people if they are pissed about tainted milk, lack of social mobility, and what have you.

I still see CCP to be very much like PAP of the old days, except maybe XJP wields a canon instead of a hatchet if you meet him in a cul de sac. XJP is able to make harsher or more unpopular decisions than LKY because, in aggregate, more foreign business want to be in China than Singapore.

Chinese tech will become even more influential in the daily lives of Chinese in the next decade, and with that, more prosperous, and more data-rich. Before that happens, before some company abuses the data against national security or consumer interests, and before another Jack Ma tries to influence the direction of Chinese economy, it makes a lot of sense for CCP to not only remind the business community to stay out of politics, but also to set boundaries based on what they think is fair for consumers and national security.

Alibaba is very central to the Chinese economy, mainly for connecting domestic manufacturers to domestic retailers, domestic manufacturer to international retailers. So domestic manufacturers and domestic retailers are going to be hurt without baba. CCP's long-term aim of building a domestic consumer economy to increase its international economic clout as an importer of EU/US products will also be hurt without TMall. Certainly, baba is not irreplaceable in this 'broker' role as there is no lack of able competitors in the e-commerce space.

Sentiments surrounding baba is very negative right now, there are a lot of negative news on new regulations but I think none (or all) of it will kill baba or any of the larger platforms. Certainly, it will be harder for Chinese tech companies to make a buck now. But the regulations will also discourage new entrants to the market, and probably slows the smaller and bigger players alike.

Assuming that baba does continue to grow, current prices look like a good opportunity. But I also think a lot of such a bet will be on the management/company's ability to continue to innovate and execute its way to deliver value to end users.

[Shiyi]

After cracking down for almost a year now, I'm quite convinced that most of the action stems from CCP's desire to maintain control and influence. The official rhetoric that some of their actions are to manage social problems (e.g. pressure from education expectations, inequality) is not different from their desire to maintain control and influence; you won't win the hearts of people if they are pissed about tainted milk, lack of social mobility, and what have you.

I still see CCP to be very much like PAP of the old days, except maybe XJP wields a canon instead of a hatchet if you meet him in a cul de sac. XJP is able to make harsher or more unpopular decisions than LKY because, in aggregate, more foreign business want to be in China than Singapore.

Chinese tech will become even more influential in the daily lives of Chinese in the next decade, and with that, more prosperous, and more data-rich. Before that happens, before some company abuses the data against national security or consumer interests, and before another Jack Ma tries to influence the direction of Chinese economy, it makes a lot of sense for CCP to not only remind the business community to stay out of politics, but also to set boundaries based on what they think is fair for consumers and national security.

Alibaba is very central to the Chinese economy, mainly for connecting domestic manufacturers to domestic retailers, domestic manufacturer to international retailers. So domestic manufacturers and domestic retailers are going to be hurt without baba. CCP's long-term aim of building a domestic consumer economy to increase its international economic clout as an importer of EU/US products will also be hurt without TMall. Certainly, baba is not irreplaceable in this 'broker' role as there is no lack of able competitors in the e-commerce space.

Sentiments surrounding baba is very negative right now, there are a lot of negative news on new regulations but I think none (or all) of it will kill baba or any of the larger platforms. Certainly, it will be harder for Chinese tech companies to make a buck now. But the regulations will also discourage new entrants to the market, and probably slows the smaller and bigger players alike.

Assuming that baba does continue to grow, current prices look like a good opportunity. But I also think a lot of such a bet will be on the management/company's ability to continue to innovate and execute its way to deliver value to end users.

China cannot do without tech companies. But it can do without Baba.
IMHO, no company is indispensable, especially in China. More so for those companies billed to be "too big to fail". Jack Ma has paid a hefty price for taking on the government.

[Wildreamz]

China cannot do without tech companies. But it can do without Baba.
IMHO, no company is indispensable, especially in China. More so for those companies billed to be "too big to fail". Jack Ma has paid a hefty price for taking on the government.

That's the common perception, especially outside of China. But looking back there are many early signs of impending regulations/wealth redistribution even before the speech was made.

And new regulations, clearly isn't narrowly targeted towards Alibaba as well.

[Wildreamz]

Vicki Zhao's name was scrubbed from the Chinese internet. Here's what we know so far.
https://mothership.sg/2021/08/vicki-zhao...disappear/

Zhao's friendship with Alibaba founder Jack Ma had been magnified as well, given the latter's run-in with the authorities recently, DW News reported.

Zhao had amassed a fortune through investments that included an early stake in Alibaba Pictures Group, a film company under the Alibaba Group, Bloomberg reported.

In addition, Zhao's husband, businessman Huang Youlong, had partnered with Ma on a private equity deal in 2015.

[Choon]

After cracking down for almost a year now, I'm quite convinced that most of the action stems from CCP's desire to maintain control and influence. The official rhetoric that some of their actions are to manage social problems (e.g. pressure from education expectations, inequality) is not different from their desire to maintain control and influence; you won't win the hearts of people if they are pissed about tainted milk, lack of social mobility, and what have you.

I still see CCP to be very much like PAP of the old days, except maybe XJP wields a canon instead of a hatchet if you meet him in a cul de sac. XJP is able to make harsher or more unpopular decisions than LKY because, in aggregate, more foreign business want to be in China than Singapore.

Chinese tech will become even more influential in the daily lives of Chinese in the next decade, and with that, more prosperous, and more data-rich. Before that happens, before some company abuses the data against national security or consumer interests, and before another Jack Ma tries to influence the direction of Chinese economy, it makes a lot of sense for CCP to not only remind the business community to stay out of politics, but also to set boundaries based on what they think is fair for consumers and national security.

Alibaba is very central to the Chinese economy, mainly for connecting domestic manufacturers to domestic retailers, domestic manufacturer to international retailers. So domestic manufacturers and domestic retailers are going to be hurt without baba. CCP's long-term aim of building a domestic consumer economy to increase its international economic clout as an importer of EU/US products will also be hurt without TMall. Certainly, baba is not irreplaceable in this 'broker' role as there is no lack of able competitors in the e-commerce space.

Sentiments surrounding baba is very negative right now, there are a lot of negative news on new regulations but I think none (or all) of it will kill baba or any of the larger platforms. Certainly, it will be harder for Chinese tech companies to make a buck now. But the regulations will also discourage new entrants to the market, and probably slows the smaller and bigger players alike.

Assuming that baba does continue to grow, current prices look like a good opportunity. But I also think a lot of such a bet will be on the management/company's ability to continue to innovate and execute its way to deliver value to end users.

I think Ali had also helped greatly to enhance the coverage and service level of China's logistics/courier industry. And spearheaded the jump into a cashless society making commerce and lives so much easier.

If you could share - how do you value Ali - that it looks like a good opportunity? 

In attached picture, I am valuing Ali at ~30X historical PE and ~20+ forward PE (assuming double-digit profit growth). Being more used to traditional-stocks, I hesitant/struggle to think this is CHEAP. Yet ~20+ forward PE within a few years sound reasonably fair to me (for reasons I cannot fully understand and explain).

[attachment=1808]

[CY09]

Thanks Choon.

A bit lazy and will like to seek your help. For me, personally i think that Alibaba will grow its cashflow/profits at a pace of 10% per annual in the foreseeable future. With this model, what is the expected forward P/E at FY24.

Also is the share based compensation for Alibaba based on what they stated just curious about this

[Choon]

Thanks Choon.

A bit lazy and will like to seek your help. For me, personally i think that Alibaba will grow its cashflow/profits at a pace of 10% per annual in the foreseeable future. With this model, what is the expected forward P/E at FY24.

Also is the share based compensation for Alibaba based on what they stated just curious about this

Based on your assumption of 10% growth, FY24 PE would be 23X.

Note that the 10% growth assumption is applied on my definition of core earnings for FY21 of RMB86B. It excludes associates/investees (e.g. Ant) and interest and investment income. I also assume a higher round-number tax rate of 20%. Reported net income for FY21 was higher at RMB143B.

FY21 SBC is per what Ali reports.

But why FY24? And do you think 23X in FY24 is cheap or fair?

[attachment=1809][attachment=1810]

[CY09]

I have no answer but truthfully this are my viewpoints

China E-Commerce: Likely a 3-5% profit growth annualized. This year Baba has already guided for no growth as it needs to increase cost to help local businesses on its commerce platform

ANT: Another 5-8% annualized grower. No longer able to grow quickly due to regulators clamping on it

Baba cloud computing: likely the star of the show who will be gaining double digit growths and eventually breaking even due to operating leverage. For me I think by FY 24, it will be profitable and rake in RMB 1 billion.

Digital Media and Entertainment: Likely loss making but a RMB 5 billion blackhole.

Lazada and Rest: Still will be equally poor results due to competition

With my views across these segments, I am trying to figure out how much will baba be worth in 3 years time and invest in it now. Assuming a 20x forward PE of FY24 for holding baba as it executes its business, trying to find out the price to invest in it. Why a 3 year horizon frame because currently China regulatory landscape is too choppy and it will not be forgotten until post 2022 and given how the Western World views the Chinese Govt in a bad light

Why P/E 20 because henceforth Baba's cloud computing and ANT will be the one driving earnings. To me, this is likely to be an 8% annual profit growth which is around what I expect for holding onto Alibaba. I feel P/E 20 is fair because it is 5% earnings on my investment in it, aka the risk free rate for CPF-SA first 40k

[Choon]

I have no answer but truthfully this are my viewpoints

China E-Commerce: Likely a 3-5% profit growth annualized. This year Baba has already guided for no growth as it needs to increase cost to help local businesses on its commerce platform

ANT: Another 5-8% annualized grower. No longer able to grow quickly due to regulators clamping on it

Baba cloud computing: likely the star of the show who will be gaining double digit growths and eventually breaking even due to operating leverage. For me I think by FY 24, it will be profitable and rake in RMB 1 billion.

Digital Media and Entertainment: Likely loss making but a RMB 5 billion blackhole.

Lazada and Rest: Still will be equally poor results due to competition

With my views across these segments, I am trying to figure out how much will baba be worth in 3 years time and invest in it now. Assuming a 20x forward PE of FY24 for holding baba as it executes its business, trying to find out the price to invest in it. Why a 3 year horizon frame because currently China regulatory landscape is too choppy and it will not be forgotten until post 2022 and given how the Western World views the Chinese Govt in a bad light

Why P/E 20 because henceforth Baba's cloud computing and ANT will be the one driving earnings. To me, this is likely to be an 8% annual profit growth which is around what I expect for holding onto Alibaba. I feel P/E 20 is fair because it is 5% earnings on my investment in it, aka the risk free rate for CPF-SA first 40k

Thanks.