Jump to content

Recommended Posts

http://oraclefromomaha.wordpress.com/2014/04/20/whats-alibaba-really-worth-2/

 

Good read. I'm not even looking into the company as I don't know enough about China, but I thought it was very instructive to look at these other similar business and see how even if you discount back to the IPO, you could have paid very high multiples and still have done well. Reminds me of a recent post by @Jesse_Livermore where he did a similar thing with Wal-Mart and other companies:

 

http://philosophicaleconomics.wordpress.com/2014/03/22/wmt/

Link to post
Share on other sites
  • Replies 390
  • Created
  • Last Reply

Top Posters In This Topic

I think these great businesses that do not rely on superior capital allocation but benefit from the fact that they are low capex, platform businesses usually related to virtual services with extremely strong moats due to network effects are still very much underappreciated.

 

There might be value where most people arent looking for it. Among typical value investments I have also owned Baidu since it went below $100 at the end of 2012 and I am certainly looking at Alibaba which could be a great valueplay. Though I agree with the author of the article that buying Yahoo for Alibaba might not be a good idea. And of course it doesnt mean you should pay any price but I am hopeful that the IPO price might suffer if the current tech market environment continues to be cautious.

Link to post
Share on other sites

This article optimistically pegs Yahoo's core business at a negative $10 billion dollar valuation due to Alibaba - http://www.theatlantic.com/business/archive/2014/04/the-peculiar-worthlessness-of-yahoo/360851/?utm_content=bufferdc957&utm_source=twitter.com

 

Also, according to a Seeking Alpha commenter (http://seekingalpha.com/article/2098753-how-to-play-the-alibaba-ipo-yahoo-vs-softbank-vs-others), 0.3% of Alibaba is owned by China Dongxiang (HK:3818) which apparently amounts to 63 Hong Kong cents per share.

I've not looked into it yet, but the stock currently trades at HK$ 1.52 per share.

 

Somehow though, I'd be surprised if the market isn't mispricing things somewhere between Softbank, Yahoo and China Dongxiang. How much of that is simply my enthusiasm talking though, I can't really be sure.

 

 

 

Link to post
Share on other sites

I got interested in it after reading the article. The internet seems to gravitate naturally towards monopolies which creates very strong moats for the likes of FB, GOOG and Amazon. If Alibaba trades below forward PE 20 I will most likely take a punt at it.

Link to post
Share on other sites

what's the HK ticker for? i thought it was going to list in new york?

 

There is no HK ticker. Alibaba decides to list in NY because HK will not accommodate its ownership structure and among other reasons.

 

Alibaba e-commerce site (part of Alibaba Group) was listed in Hong Kong. It was taken private by Alibaba group in 2012.

 

Another interesting thing I found was that a similar stake as Dongxing holds (part of Yunfeng fund) transacted early this year that valued Alibaba at $129 billion.

Link to post
Share on other sites

is there any % of income from alibaba reflected in softbank's figures? They will do 4-6 billion$ in income this year (alibaba). I dont think a 35x multiple is unreasonable for the ipo here. a 33% stake would imply roughly 57 billion$.

 

Softbank did 3 billion $ in net income, so you pay about 33 billion for the remaining business. Which seems pretty cheap.

 

If you value softbank at 15x earnings, then your getting alibaba for between 22-33x earnings. Which seems really cheap for a business like that (or at least 22x earnings is). You have serious growth prospects, really high return on capital and a big moat.

 

sina holds a 1% stake. Ticker is SINA. They bought 50 million$ in octobre 2011. So i assume that is 1%? so that is worth north of 1 billion. They also hold 100 million $ worth of Youku Tudou shares, apparantly the chinese youtube?

 

And they did 45 million in net income in 2013, and are growing. revenue grew 25% YoY, but gross profit grew 40%. and there seems to be some leverage there. So you could argue that their core business is worth more then 10x earnings?

 

Anyone have an opinion on Sina?

Link to post
Share on other sites

Ok so Sina holds 56% of weibo, which did an IPO and is the twitter of China apparantly?  Currently Weibo stands at 4.63 billion, so that is 2.6 billion$ for Sina. They have about a billion $ in net cash.

 

So that is 2.6 billion + 1 billion + 100 million for the youku thing. And add about 1.2 billion for the alibaba stake? That is 4.8 billion $ in net assets. Or maybe a bit less I dont know.

 

And since weibo is still losing money, their underlying business earns about 45 million$ in 2013 on top of that, and there seems to be some leverage there. So another 450 million? They have a market cap of 3.72 billion. So if we assume roughly 5 billion that is 34% upside.

 

But it can change wildly. If you think alibaba will do 5 billion and deserves a 35x multiple that is 1.75b$ for sina + 1bn$ in net cash + 2.6 billion$ in weibo + 100 million in youku stock + 15x multiple for their business which earns 45 million = 675 = 6.1 billion$. which implies 64% upside.

 

Seems worth digging into.

Link to post
Share on other sites

Ok so Sina holds 56% of weibo, which did an IPO and is the twitter of China apparantly?  Currently Weibo stands at 4.63 billion, so that is 2.6 billion$ for Sina. They have about a billion $ in net cash. This does not add in the 563 million Alibaba bought tho. This happened april 9th. im not sure if the 56% is before or after april 9th? Lets assume its not included.

 

So that is 2.6 billion + 1 billion + 100 million for the youku thing. And add about 1.2 billion for the alibaba stake? That is 4.8 billion $ in net assets. Or maybe a bit less I dont know.

 

And since weibo is still losing money, their underlying business earns about 45 million$ in 2013 on top of that, and there seems to be some leverage there. So another 450 million? They have a market cap of 3.72 billion. So if we assume roughly 5 billion that is 34% upside.

 

But it can change wildly. If you think alibaba will do 5 billion and deserves a 35x multiple that is 1.75b$ for sina + 563m$ in cash that is not included in their latest 6k, + 1bn$ in net cash + 2.6 billion$ in weibo + 100 million in youku stock + 15x multiple for their business which earns 45 million = 675 = 6.7 billion$. which implies 80% upside.

 

Seems worth digging into.

 

Didn't realize how much hidden assets Sina has. RENN is another hidden asset play, a $3.4 stock with ~$2.8 in net cash but its business is losing money. Not sure if the option value on the business taking off or getting acquired is worth 60+ cents.

Link to post
Share on other sites

is there any % of income from alibaba reflected in softbank's figures? They will do 4-6 billion$ in income this year (alibaba). I dont think a 35x multiple is unreasonable for the ipo here. a 33% stake would imply roughly 57 billion$.

 

Softbank did 3 billion $ in net income, so you pay about 33 billion for the remaining business. Which seems pretty cheap.

 

If you value softbank at 15x earnings, then your getting alibaba for between 22-33x earnings. Which seems really cheap for a business like that (or at least 22x earnings is). You have serious growth prospects, really high return on capital and a big moat.

 

sina holds a 1% stake. Ticker is SINA. They bought 50 million$ in octobre 2011. So i assume that is 1%? so that is worth north of 1 billion. They also hold 100 million $ worth of Youku Tudou shares, apparantly the chinese youtube?

 

And they did 45 million in net income in 2013, and are growing. revenue grew 25% YoY, but gross profit grew 40%. and there seems to be some leverage there. So you could argue that their core business is worth more then 10x earnings?

 

Anyone have an opinion on Sina?

 

If SINA bought the stake in 2011, it's probably worth closer to $200million than $1billion. See this link: http://www.reuters.com/article/2014/02/12/us-alibaba-valuation-idUSBREA1B0E320140212

Looks like Alibaba sold these stakes in 2011 in $50million blocks.

Link to post
Share on other sites

that is weird, it was publicly traded in october 2011? 50 million would have bought you a 0.83% stake at worst back then? Why buy a stake at a 300% premium?

 

Hmm i guess that is only the alibaba website?

 

Yada,

 

The public traded company in Hong Kong exchange was Alibaba.com, the e-commerce site, which is only part of Alibaba Group. The Alibaba group is much bigger, including taobao.com, tmall.com, Alipay, etc.

Link to post
Share on other sites

So the $50 stake is valued closer to $250 mil? The value assigned to Weibo looks high and is probably justified using a per user value argument. It obviously has strategic value to Alibaba, the cash flow rich white knight. So Weibo's private market value shouldn't be too far off from its current market value, at most 20-30% discount.

Link to post
Share on other sites

yeah if there is so much growth this will become the largest company in the world p retty quickly. For over a trillion $. Isn't that a bit rich?

 

Also, how do they pay shareholders outside china, since they make money in renminbi? Arent there some complications?

Link to post
Share on other sites

Here's part 2 of the post that made me start this thread:

 

https://oraclefromomaha.wordpress.com/2014/04/23/alibaba-part-2-an-overview/

 

After reading the post, the key question is to whether to overpay with the full knowledge that fundamental will catch up given enough time or potentially lose out an opportunity of a lifetime. In a sadistic sense, I wish we can have another recessions and get the chance to buy another "priceline."

Link to post
Share on other sites

arent there capital restrictions in china in regard to paying out $ to foreign shareholders if they make money in renminbi? How does that work here?

 

They get around the restriction through share buyback. We are unlikely to see any dividend in the near future. Actually I am not really sure. I used to own SNP. It's a state owned oil refiner. They make their money in renminbi. I got my dividend payment.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.




×
×
  • Create New...