Brand value? Alibaba, Taobao, Tmall. Now owns 83% of Lazada.
Use of new technology to disrupt? Cloud computing business (5% of total revenue) has grown 100% yoy, 1 million paying users, but still not profitable.
Sympathy/spillover effect on valuation? E-commerce giants have been the best performing stocks in the past 2 years but this company is one of the drivers.
Potential sector or index selling? Being such a prominent brand its likely to be the cause and not the effect of sector buying/selling.
Under/over-reaction to news?
- Earnings is the only obvious market moving news lately
- Recently grew 56% yoy
- Core commerce RMB 43b up 58%
- Cloud computing RMB 2b up 100%
- Digital media RMB 4b up 30%
- Innovation initiatives RMB 0.6b up 21%
- Only the core commerce is profitable at this point in time
- Continue to invest in business to support future growth
- Tmall Supermarket
- Cloud computing business
- Expand user base and enhance user experience rather than make money
- Continue to make strategic investments to expand user base and geographic coverage
- Increased ownership in Lazada to 83%
- Too much brand value to determine precise valuation
- Operating profit grew 65% but net income fell 42% in FY2016
- Net cash of approx $3 per share, apart from that cash flows and expenditures are too unpredictable to model given the experimental expansion strategy
- P/E ratio or PEG ratio is our best valuation metric
- Cloud computing business growth rate