Alibaba Hong Kong stocks hit a new “pre-test cheats”

This article is from WeChat public account:IPO that thing (ID: ipopress), author: Marco, from the cover: Oriental IC

What did the Ali prospectus say?

On the evening of November 13, Ali officially submitted a listing disclosure prospectus to the Hong Kong Stock Exchange. Most of the content is actually similar to the information disclosed by Ali in the US stock market report and the investor day, but it is only explained in Chinese, so interested friends can download it on the disclosure page:

The link is as follows:https://www1.hkexnews.hk/app/sehk/2019/100781/documents/sehk19111301429_c.pdf

On the business side, we have already said it, so let’s pick some points worth noting:

The prospectus shows that in the fiscal year 2019, (April 1, 2018, March 31, 2019), the company realized revenue 376.844 billion yuan, net profit of 80.234 billion yuan. In addition, during the three months from April 1, 2019 to June 30, 2019, Alibaba achieved a total operating income of 114.924 billion yuan and a net profit of 19.122 billion yuan.

In terms of shareholding, Softbank currently holds 25.8%, Ma Yun holds 6.1%, Cai Chongxin holds 2.0%, and other executives hold 0.9%.

Ali disclosed the cost of acquiring koala in the prospectus document for listing in Hong Kong. The prospectus shows that Ali spent 12.958 billion yuan on the koala, accounting for 100% of the shares. In dollar terms, Ali acquired a 100% stake in Koala from Netease for a total purchase price of $1.825 billion. Previous media reports were $2 billion.

The plan is to issue 500 million shares of common stock in Hong Kong, plus 75 million over-allotment shares, and plans to raise about $13 billion.

financial analysis

Let’s take a look at Ali’s revenue and profit for the 12 months ending June 30, 2019. It can be seen that income has grown steadily. The total revenue of the past year reached US$59.8 billion(402.4 billion yuan), a year-on-year increase of 46.2%.After adjustment, EBITA reached $16.8 billion (112.9 billion yuan).

Of course, Alibaba’s revenue has such a rapid growth rate. One reason is the growth brought about by mergers and acquisitions. After eliminating the acquired business, Alibaba’s revenue growth in the past 12 months was 37%. We can compare the revenue growth of other technology giants, Facebook 29%, Tencent 22%, Amazon 21%, Google 20%, Microsoft 14%. We are pulling a little longer, compared to the revenue growth of the past five years, Ali is also faster than other technology giants.

At the profit end, the EBITA Composite grew by 30% after the Group’s three-year adjustment; EBITA’s profit increased by 41% in the three-year period after the adjustment of the e-commerce platform business.

It can be seen that e-commerce profits have grown faster and contributed all profits of the Ali Group.

In order to better understand Ali’s business, we are profitable from various businesses in Ali.The ability to analyze, using the latest published Q3 data.

The first is the core e-commerce, with revenue of 101.22 billion yuan in the third quarter, a year-on-year increase of 40%.

After adjustment, EBITA 38.57 billion yuan, the profit rate was 38%, down 3pct year-on-year. The main reason for the decline is to continue to invest in the construction of new retail and inventory backlog of direct business. The company predicts that the profit margin of core TV will continue to be under pressure in the future.

The core e-commerce business is numerous, in fact, Taobao and Tmall earn money. As investors, we are more concerned with Tmall Taobao customer management and Tmall commission income.

Domestic retail revenue = Tmall Taobao customer management + Tmall commission + other (Box Horse, Intime and Tmall imports), in order to To observe the growth of online commercial retail in Ali, we can exclude other income and investigate the growth of domestic e-commerce (Tmall Taobao). This part of Q3 revenue was 57.58 billion yuan, a year-on-year increase of 25%, compared with 26% in the previous quarter.

According to the statistics of the Bureau of Statistics, China’s online retail sales in the first three quarters increased by 16.8% year-on-year to 7.32 trillion yuan, of which online retail sales of physical goods increased by 20.5% year-on-year to 5.78 trillion, accounting for 19.5% of social consumption, so Ali The growth rate of e-commerce is faster than the overall e-commerce growth rate.

In addition to the core e-commerce, the other three businesses are at a loss.

Alibaba Cloud Q3 revenue increased 64% year-on-year to 9.291 billion, mainly driven by the average expenditure growth of each customer. The growth rate slowed further, but it was not obvious. The growth rate in the last quarter was 66%. In contrast, Amazon AWS grew by 35% and Microsoft Azure grew by 59%.

The adjusted EBITA loss was 521 million yuan, the loss rate was -6%, and the loss rate was the same.It has risen more than the ring. The company’s explanation is that it continues to invest in infrastructure and attract talent.

The future of Alibaba Cloud’s profit is still inconclusive. We can refer to the more mature US cloud computing market. Amazon’s third quarter AWS revenue of 9 billion US dollars, operating profit of 2.261 billion US dollars, the profit rate reached 25%. If Ali can reach this profit rate in the future, the increase in profits is very considerable.

Da Wen Entertainment Q3 revenue was 7.296 billion yuan, a year-on-year increase of 23%, mainly due to the consolidation of Ali Pictures in March. The adjusted EBITA loss was 2.207 billion yuan, and the loss rate was -30%. The year-on-year loss rate narrowed by 34pct year-on-year and narrowed by 5pct.

Innovative business Q3 revenue was 1.21 billion yuan, a year-on-year increase of 14%, mainly due to the increase in the income of Gaode map. The adjusted EBITA loss was 1.917 billion yuan, the loss rate was -158%, and the year-on-year loss rate expanded by 42pct, an increase of 5pct.

development prospects, valuation analysis

On Investor Day, Ali gave its valuation framework, with C-side business and B-side business valuation.

1) In the C-side business:

Ali has 670 million domestic annual active consumers; plusAAC reached 730 million on local life services, entertainment, etc. If you add international business such as Lazada, the global AAC will reach 860 million.

Compared with Amazon’s market capitalization of about $900 billion, commercial services excluding cloud services correspond to $40-500 billion, and Amazon serves about 400 million consumers, so the market value per AAC is about $1,000-1250.

Based on Amazon’s single-user value, Ali’s C-side business corresponds to a market value of approximately $860 billion. And more importantly, Ali’s AAC is profitable, and the C-side business generates $17 billion in EBITA, which means that each AAC brings a profit of $20.

2) B-side business:

In the past year, B-end business revenue reached 6.8 billion US dollars; strategic investment (including ant gold service, etc.) total face value of more than 83 billion US dollars.

C-side + B-end = $94 billion, and the current market value of Ali is $475.1 billion. Of course, this is only the valuation that Ali gave to himself, and the market does not necessarily buy it.

Let’s take a look at the PE valuation. Ali’s revenue guidance for 2020 is 500 billion yuan, up 33% year-on-year. In the first quarter of the fiscal year, Ali’s revenue growth rate was 42%, and the second quarter was 40%. As long as the next two quarters can be maintained A 30% increase will meet expectations, and the 2020 fiscal year should be a problem.

Alibaba’s core logic remains unchanged. The basic business of the core e-commerce business is still stable. The To B business has great potential. The cloud computing market is still being promoted in China. As long as it can maintain market share, it can release huge profits in the future. .

We generally use the non-GAAP net profit to represent net profit, because it eliminates the impact of some one-time gains and equity expenses.Reflect the benefits of operating the business. According to the latest financial report, Ali’s non-GAAP earnings per share for the past 12 months was 6.71 US dollars, the current stock price is 182.48, Ali PE(TTM)=27.1x. Considering the rapid growth of Ali’s revenue, the expectation of the future profit release of To B business, today’s valuation is not expensive.

Alibaba’s mission is to make the world have no hard-to-do business and continue to develop for at least 102 years. 2019 is the 20th year of Alibaba. The Ali digital economy and the Alibaba commercial operating system are built. The new business model is set off. This huge inertia will not be suspended. This is actually the simplest and largest logic.

Alibaba’s second listing highlight in Hong Kong

This is not the first time Ali has listed in Hong Kong. In November 2007, Alibaba (1688.HK)B2B concept landing port The exchange, but the business listed at that time was only the B2B business, and now the listing is the overall listing. What are the highlights of this listing and what effect does it have on Ali?

1) On July 15 this year, Alibaba conducted a stock split, the ratio of common stock to American depositary shares (ADS) From 1:1 to 8:1, the number of its common shares has increased from the previous 4 billion shares to 32 billion shares. So the price of a common stock is $23.375, and the price listed in Hong Kong is about HK$183.48 per share (exchange rate of HK$7.85/dollar), lower The threshold for Hong Kong investors to buy.

2) Xiaomi Group, a company with different rights listed in Hong Kong last year, (01810.HK) and US group reviews(03690.HK) has been included in the Hong Kong Stock Connect since October 28, allowing domestic investors to invest in domestic outstanding technology companies. As domestic investors are more familiar with foreign companies like Alibaba and other excellent Internet companies, it is conducive to the improvement of valuation.

3) Broaden the financing channels and have a very positive effect on the diversification of Ali funds and the reduction of dependence on the US market.

4) Many affiliates of Alibaba, such as Ali Health and Ali Pictures, have been listed in Hong Kong. The return of Alibaba will also revitalize these resources and create synergies.

5) The additional shares issued this time account for a small share of the total share capital, so it has little effect on Ali itself. Ali currently has 2.6 billion ADRs. If it is financing at $180 per ADR, $10 billion to $15 billion will require a new issue of 0.55 billion to 83 million new ADRs, accounting for 2.1%-3.2% of total ADR.

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