not vested
Alibaba: Why JL Warren Capital Sees No Upside By Shuli Ren
Is Ant Financial’s IPO drawing near?
Lately, brokerages from Deutsche Bank to CLSA have been raising their price targets for Alibaba Group (BABA), seeing potential in e-Finance and consumer cloud business.
Earlier this month, Hong Kong local media was talking about Ant Financial listing in Hong Kong early next year, a rumor the financial company denied. Alibaba has 1/3 stake in Ant Financial.
Billionaire Jack Ma, chairman of Alibaba Group Holding Ltd., speaks at the Asia-Pacific Economic Cooperation (APEC) CEO Summit in Manila, the Philippines, on Wednesday, Nov. 18, 2015. Businesses and people should be free to trade because it’s a human right and represents freedom, Ma told the APEC summit.
But according to JL Warren Capital, an independent China research shop and largely a China bear, Alibaba has little upside left at its current share price.
JL Warren has no issue with Ant Financial, valuing the business at $80 billion, a third higher than Ant Financial’s latest round of private placement. It reckons Alibaba’s cloud business is worth $15-16 per share, in line with perpetually optimistic CLSA’s valuation.
Of course JL Warren talked about weak China macro again, but this time, the research shop’s key point is that China’s e-commerce is already becoming saturated. The research shop wrote:
A weak retail environment has accelerated e-tail industry consolidation, benefiting BABA, JD and VIPS to various degrees. The upside however, is partially offset by the
softness in macro-economy and the overall
online market saturation.
In some extreme cases, the
oversaturation of Ecommerce has resulted in many online merchandisers reversing trend and going back to traditional brick and mortal retail, citing customer acquisition costs as too high.
According to our checks with the merchandisers associations in major markets, ~
15% Ecommerce providers have dropped out of the T-mall platform, as they have been consistently unprofitable on rising traffic acquisition and conversion cost coupled with rising transaction fees to BABA.
JL Warren values Alibaba Group at $106 per share. “Our price target of $106 is based on the Sum-of-Parts analysis of the conglomerate, using 15% holdingco discount.”
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... no-upside/
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