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Equity Bottom-Up

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Given the significant uncertainty surrounding 1) the impact that a regulatory-induced restructuring could have on the eventually listed <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a>, and 2) the full final impact of increased anti-monopoly regulatory efforts from the State Administration for Market Regulation (SAMR) on the <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, it has been difficult to assess a fair valuation level for the company. Following the indefinite suspension of Ant Group’s IPO, in November 2020, we witnessed a c.30% sell-off (or $260bn!) in Alibaba Group’s share price, before starting its recovery back to current levels, triggered by the reappearance of Jack Ma and a solid earnings report for the quarter ended December 2020. The net result, however, has been a roughly 17% (or $140bn) decline in Alibaba’s listed value. In this insight, I take a deep dive into Alibaba’s Sum-of-The-Parts valuation to assess what implied value is currently priced in for their equity holding in Ant Group, and what can be deduced from the current valuation for their Core Commerce operations.

Given the significant uncertainty surrounding 1) the impact that a regulatory-induced restructuring could have on the eventually listed Ant Group (6688 HK), and 2) the full final impact of increased anti-monopoly regulatory efforts from the State Administration for Market Regulation (SAMR) on the Alibaba Group (9988 HK), it has been difficult to assess a fair valuation level for the company. Following the indefinite suspension of Ant Group’s IPO, in November 2020, we witnessed a c.30% sell-off (or $260bn!) in Alibaba Group’s share price, before starting its recovery back to current levels, triggered by the reappearance of Jack Ma and a solid earnings report for the quarter ended December 2020. The net result, however, has been a roughly 17% (or $140bn) decline in Alibaba’s listed value. In this insight, I take a deep dive into Alibaba’s Sum-of-The-Parts valuation to assess what implied value is currently priced in for their equity holding in Ant Group, and what can be deduced from the current valuation for their Core Commerce operations.

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Alibaba: A Detailed Look at the SOTP, and What that Tells Us About the Ant Group and Core Commerce