Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>’s share price took a beating over the last few months. It began when Chinese regulators halted the $35 billion IPO of Alibaba spinoff, <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a>, the world's largest financial technology company. Afterwards, China’s top antitrust watchdog, The State Administration for Market Regulation (SAMR), fined Alibaba for not making adequate declarations to authorities about past acquisitions and also filled an investigation into Alibaba’s suspected monopolistic practices. Then, The People's Bank of China ordered Ant group to formulate a rectification plan and an implementation timetable to comply with new regulatory and anti-monopoly requirements. Meanwhile, the founder of Alibaba, Jack Ma went missing for months.This is probably the worst time period in Alibaba’s history. Therefore, a lot of pressure was on Alibaba yesterday to release strong 3QFY21 results. Although not amazing, the company managed to beat consensus revenue and OP by 3.0% and 3.2% respectively.

Alibaba Group (BABA US)’s share price took a beating over the last few months. It began when Chinese regulators halted the $35 billion IPO of Alibaba spinoff, Ant Group (6688 HK), the world's largest financial technology company. Afterwards, China’s top antitrust watchdog, The State Administration for Market Regulation (SAMR), fined Alibaba for not making adequate declarations to authorities about past acquisitions and also filled an investigation into Alibaba’s suspected monopolistic practices. Then, The People's Bank of China ordered Ant group to formulate a rectification plan and an implementation timetable to comply with new regulatory and anti-monopoly requirements. Meanwhile, the founder of Alibaba, Jack Ma went missing for months.This is probably the worst time period in Alibaba’s history. Therefore, a lot of pressure was on Alibaba yesterday to release strong 3QFY21 results. Although not amazing, the company managed to beat consensus revenue and OP by 3.0% and 3.2% respectively.

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Alibaba shares have significantly underperformed its peers over the last twelve months due both to the share overhang stemming from both China’s trade conflict with the US and internal risks related to China’s own anti-monopoly investigations as well as concerns over the cancellation of Ant Financial’s IPO. Its share price has partially recovered YTD as some of the share overhang concerns were allayed, but the share overhang lingers, in our view. However, in the current market where the majority of the tech stocks have nearly doubled or more in the last twelve months, we believe this underperformed stock offers an attractive risk-return proposition at current levels.  If the bulls were looking for an outstanding December quarter to trigger a rebound, it did not happen, even though the Dec quarter results were solid.  What we took away from the results is that the operating fundamentals are strong and there are positive signs of loss-making segments turning the corner:   <ul>
<li>Highest quarterly revenue growth in 2020 (37% YoY). </li>
<li>Historic high adjusted EBITA for Core Commerce and highest quarterly operating profit in history. </li>
<li>The cloud segment has turned profitable for the first time.</li>
<li>Cainiao has recorded positive operating cash flow. </li>
</ul>The key risk for the company is higher than expected margin erosion from investments in new businesses.

Alibaba shares have significantly underperformed its peers over the last twelve months due both to the share overhang stemming from both China’s trade conflict with the US and internal risks related to China’s own anti-monopoly investigations as well as concerns over the cancellation of Ant Financial’s IPO. Its share price has partially recovered YTD as some of the share overhang concerns were allayed, but the share overhang lingers, in our view. However, in the current market where the majority of the tech stocks have nearly doubled or more in the last twelve months, we believe this underperformed stock offers an attractive risk-return proposition at current levels.  If the bulls were looking for an outstanding December quarter to trigger a rebound, it did not happen, even though the Dec quarter results were solid.  What we took away from the results is that the operating fundamentals are strong and there are positive signs of loss-making segments turning the corner:   
Highest quarterly revenue growth in 2020 (37% YoY). 
Historic high adjusted EBITA for Core Commerce and highest quarterly operating profit in history. 
The cloud segment has turned profitable for the first time.
Cainiao has recorded positive operating cash flow. 
The key risk for the company is higher than expected margin erosion from investments in new businesses. 

Alibaba (BABA US): Unloved but Undeterred

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Alibaba Group Holding  / Equity Capital Markets

<div>
2020 saw nine companies undertake a secondary listing in Hong Kong, including the likes of, <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>, <a href="https://www.smartkarma.com/entities/netease-inc-adr" target="_blank" data-smartkarma-citation="entities:17203:1" rel="noopener">NetEase Inc (NTES US)</a> and <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a>, to together raise over US$16bn.
Things have only been getting more uncomfortable for China listings in the US, with the passage of the Holding Foreign Companies Accountable Act through Congress and being signed by Trump. At the same time, Hong Kong has taken further steps to welcome more companies back home. 
In our previous notes:
</div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang,</a> published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. </li>
<li>
<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a> published in May 2020, we looked at the recent developments and provided an revised short-list</li>
<li>In <a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a>, published in May 2020, we spoke about the implication of the act which had made its way through the senate.</li>
</ul></div><div>In this note, I'll talk about the updates over the past few months and look at the pipeline of deals for the next few months.<a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener"></a></div>


2020 saw nine companies undertake a secondary listing in Hong Kong, including the likes of, JD.com Inc (ADR) (JD US), NetEase Inc (NTES US) and Yum China Holdings, Inc (YUMC US), to together raise over US$16bn.
Things have only been getting more uncomfortable for China listings in the US, with the passage of the Holding Foreign Companies Accountable Act through Congress and being signed by Trump. At the same time, Hong Kong has taken further steps to welcome more companies back home. 
In our previous notes:


China ADRs Secondary Listing Deep-Dive: Yin and Yang, published in Feb 2020,  we looked at the background and rules around undertaking a secondary listing in Hong Kong and then came up with a short-list of companies that might undertake a secondary listing. 

In China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List published in May 2020, we looked at the recent developments and provided an revised short-list
In China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home, published in May 2020, we spoke about the implication of the act which had made its way through the senate.
In this note, I'll talk about the updates over the past few months and look at the pipeline of deals for the next few months.

China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul>
<li>E-commerce apps have been taking advertising budgets from other apps.</li>
<li>The online advertising market size expanded by 12.6% in calendar 2020.</li>
<li>New online shoppers stay with e-commerce apps after the pandemic eased.</li>
<li>BABA’s core-commerce operating profit increased by 16% yoy in 3Q21, compared to a yoy decrease in 2Q21.</li>
<li>Minor businesses were no longer significant burdens.</li>
<li>US dollar’s depreciation raised BABA’s value.</li>
<li>The stock price will have an upside of 27% in one year.</li>
</ul>


E-commerce apps have been taking advertising budgets from other apps.
The online advertising market size expanded by 12.6% in calendar 2020.
New online shoppers stay with e-commerce apps after the pandemic eased.
BABA’s core-commerce operating profit increased by 16% yoy in 3Q21, compared to a yoy decrease in 2Q21.
Minor businesses were no longer significant burdens.
US dollar’s depreciation raised BABA’s value.
The stock price will have an upside of 27% in one year.


Alibaba (BABA): Many Positive Signals in December Quarter, 27% Upside

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

There are a lot of changes expected to the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> over the next 6 months.<a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, JD Logistics, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>'s Douyin and a possible revival of the shelved <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> IPO.Then there is the possibility of some large 'homecoming' listings getting included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> over the next few reviews. <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> as other names on the list.In this Insight, we lay out the potential roadmap of upcoming changes to the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> along with the impact on the stocks.

There are a lot of changes expected to the Hang Seng China Enterprises Index (HSCEI INDEX) over the next 6 months.Kuaishou Technology (1024 HK) lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are DiDi Chuxing (1284375D CH), JD Logistics, ByteDance (1460967D CH)'s Douyin and a possible revival of the shelved Ant Group (6688 HK) IPO.Then there is the possibility of some large 'homecoming' listings getting included in the Hang Seng China Enterprises Index (HSCEI INDEX) over the next few reviews. Baidu (BIDU US) is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with Pinduoduo (PDD US) and Bilibili Inc (BILI US) as other names on the list.In this Insight, we lay out the potential roadmap of upcoming changes to the Hang Seng China Enterprises Index (HSCEI INDEX) along with the impact on the stocks.

HSCEI Index Rebalances - The Year of the Ox and of More Change

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Alibaba Group Holding (9988 HK)

Alibaba 3QFY21: Not Out of The Woods Yet

This is probably the worst time period in Alibaba’s history. Therefore, a lot of pressure was on Alibaba yesterday to release strong 3QFY21...

Oshadhi Kumarasiri

Alibaba (BABA US): Unloved but Undeterred

Alibaba shares underperformed its peers significantly in the last 12 months. We reviewed the company's FY21Q3 results which prime the stock for an...

Mitchell Kim

China ADRs Secondary Listing - Pipeline Looks Rich, Have Three Years to Move

2020 saw nine companies undertake a secondary listing in Hong Kong, to together raise over US$16bn. We shortlist remaining candidates and look at...

Sumeet Singh

Alibaba (BABA): Many Positive Signals in December Quarter, 27% Upside

E-commerce apps have been taking advertising budgets from other apps. New online shoppers stay with e-commerce apps after the pandemic eased. BABA...

Ming Lu

HSCEI Index Rebalances - The Year of the Ox and of More Change

There will be a lot of changes to the HSCEI this year that will impact the sectoral composition and open up trading opportunities on the stocks and...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)