Alibaba has made huge investments in consumer cloud and financial services in addition to its core-e-commerce business. But CLSA says the company’s current stock price does not price these efforts right now.
Alibaba – how group firm help its valuation?
CLSA analyst Elinor Leung used a discounted cash flow analysis to conclude that Alibaba’s e-commerce business is now worth $110 per share. She assumed that Alibaba’s earnings would grow 21% per year in the next three years. The stock closed at $107.08 per share on Thursday.
So questions arise about Alibaba’s AliCloud and 33% stake in Ant Financial. The analyst says they will give rise to another $16 per share of value. Ant Financial’s current worth is $75 billion, and in two years, it could be worth $100 billion, the analyst believes.
“Alipay alone is US$50bn as China’s largest online-payment operator with a 45% share… Alipay alone could be worth at least US$50bn based on 43x FY18CL PE (1.3x PE/G or 31x FY19CL PE). At 10x FY18CL PS, Alipay is also valued at US$50bn,” she wrote.
For Alibaba, financing is its next biggest contributor to revenue. It rebranded its SME loan operation as Ant Credit, and now it is integrated into MYbank. Like its global peers, its value could be at $7.6 billion at 4.0xPB, the analyst states.
According to CLSA, the third largest revenue contributor is the wealth management business, which could be worth $7 billion by FY18CL. Leung, who refers to the cloud computing segment as a “bright spot,” says AliCloud “could grow 11x to Rmb32bn (US$4.4bn) by FY21CL… The business could be worth US$17- 24bn based on 10x FY18-19CL revenue, 6-9% of Alibaba’s valuation.”
Alibaba’s financial arm eyes $10 billion IPO
Ant Financial’s public listing will act as another catalyst for Alibaba, adds Barron’s. A few days ago, Hong Kong local media reported that Ant Financial was scheduled for an IPO in Hong Kong next year. It is expected that the IPO will generate no less than $10 billion, according to the Hong Kong Economic Times.
No confirmation on the timing has been made, but the media outlet claims that the Chinese financial firm is eyeing an IPO during the first half of 2017. The company has not yet decided on where it will list, said a spokesman for Ant Financial.
Last month, Alibaba Executive Chairman Jack Ma told the South China Morning Post that Ant Financial would go for an IPO some day, but management had no specific plans.