Liberty Posted April 21, 2014 Share Posted April 21, 2014 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 comment Share on other sites More sharing options...
PatientCheetah Posted April 21, 2014 Share Posted April 21, 2014 The power of secular trend on your back - China transforming into a consumer economy! Link to comment Share on other sites More sharing options...
wbr Posted April 21, 2014 Share Posted April 21, 2014 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 comment Share on other sites More sharing options...
yadayada Posted April 21, 2014 Share Posted April 21, 2014 there are other companies that own large stakes in alibaba. I remember reading a write up on it a while ago. Cannot remember where tho :( Link to comment Share on other sites More sharing options...
rykelsap Posted April 21, 2014 Share Posted April 21, 2014 The write-up you are thinking about is likely a VIC write-up on SoftBank. The link to the VIC write-up is below: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/114243 Link to comment Share on other sites More sharing options...
Guest ajc Posted April 21, 2014 Share Posted April 21, 2014 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 comment Share on other sites More sharing options...
fareastwarriors Posted April 21, 2014 Share Posted April 21, 2014 Alibaba’s worth is flotation teaser http://www.ft.com/intl/cms/s/0/8f5e50dc-c5fd-11e3-9839-00144feabdc0.html#slide0 Link to comment Share on other sites More sharing options...
SpecOps Posted April 22, 2014 Share Posted April 22, 2014 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 comment Share on other sites More sharing options...
jouni1 Posted April 22, 2014 Share Posted April 22, 2014 what's the HK ticker for? i thought it was going to list in new york? Link to comment Share on other sites More sharing options...
PatientCheetah Posted April 22, 2014 Share Posted April 22, 2014 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. Link to comment Share on other sites More sharing options...
hillfronter83 Posted April 22, 2014 Share Posted April 22, 2014 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 $129 billion. Link to comment Share on other sites More sharing options...
yadayada Posted April 22, 2014 Share Posted April 22, 2014 is there any % of income from alibaba reflected in softbank's figures? They will do 4-6 billion$ 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 comment Share on other sites More sharing options...
yadayada Posted April 22, 2014 Share Posted April 22, 2014 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$. which implies 64% upside. Seems worth digging into. Link to comment Share on other sites More sharing options...
PatientCheetah Posted April 23, 2014 Share Posted April 23, 2014 Ok so Sina holds 56% of weibo, which did an IPO and is the twitter of China apparantly? Currently Weibo stands at 4.63 billion, so that is 2.6 billion$ 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 ~$2.8 in net cash but its business is losing money. Not sure if the option value on the business taking off or getting acquired is worth 60+ cents. Link to comment Share on other sites More sharing options...
yadayada Posted April 23, 2014 Share Posted April 23, 2014 http://techcrunch.com/2014/01/07/weibo-payment/ This is interesting, alibaba clearly is interested in weibo. I think they want to set up a payment system through weibo? And with Sina holding 56% now, that could be interesting, what is insider ownership for Sina like? Link to comment Share on other sites More sharing options...
hillfronter83 Posted April 23, 2014 Share Posted April 23, 2014 is there any % of income from alibaba reflected in softbank's figures? They will do 4-6 billion$ 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 comment Share on other sites More sharing options...
yadayada Posted April 23, 2014 Share Posted April 23, 2014 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? Link to comment Share on other sites More sharing options...
hillfronter83 Posted April 23, 2014 Share Posted April 23, 2014 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 comment Share on other sites More sharing options...
PatientCheetah Posted April 23, 2014 Share Posted April 23, 2014 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 comment Share on other sites More sharing options...
ZenaidaMacroura Posted April 23, 2014 Share Posted April 23, 2014 Maybe I lack imagination, but I don't see this IPOing under 150b? At least not for investors without access to the IPO. Would go allin at 80b and just sit pretty for a decade... Link to comment Share on other sites More sharing options...
yadayada Posted April 23, 2014 Share Posted April 23, 2014 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 comment Share on other sites More sharing options...
Liberty Posted April 23, 2014 Author Share Posted April 23, 2014 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/ Link to comment Share on other sites More sharing options...
PatientCheetah Posted April 24, 2014 Share Posted April 24, 2014 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 comment Share on other sites More sharing options...
yadayada Posted April 24, 2014 Share Posted April 24, 2014 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? Link to comment Share on other sites More sharing options...
PatientCheetah Posted April 24, 2014 Share Posted April 24, 2014 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 comment Share on other sites More sharing options...
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