Oshadhi Kumarasiri

Equity Analyst

LightStream Research

Long-Short Analysis on Japan, Asia and the World

Equity Bottom-Up

<ul>
<li>Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.</li>
<li>In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.</li>
<li>Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.</li>
</ul>

Alibaba Group Holding Limited operates as a holding company. 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.

Equity Capital Markets

<ul>
<li>Freshippo (Hema) is set to be the first <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba (ADR) (BABA US)</a> company to have an IPO after the business split into six units.</li>
<li>Two key concerns for Freshippo's IPO are its failure to secure outside funding in two attempts last year and the potential conflict of interest arising from competition with Tmall Supermarket.</li>
<li>While it is still premature to make a definitive assessment of Freshippo's IPO prospects, we maintain a level of skepticism towards the company.</li>
</ul>

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.

<ul>
<li>Most Brazilian e-commerce platforms evade taxes by treating orders as individual transactions instead of business operations, despite the 60% tax on international e-commerce shipments by companies.</li>
<li>The Brazillian government plans to address this tax loophole by strengthening oversight and implementing administrative measures.</li>
<li>If <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea (SE US)</a> cannot find a viable solution to navigate this tax, there is a strong possibility that Shopee will exit the Brazilian market.</li>
</ul>

Sea Limited offers information technology services. The Company provides online personal computer and mobile digital content, e-commerce, and payment platforms. Sea serves customers worldwide.

Event-Driven

<ul>
<li>Last week, shareholders of <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> rejected all four of the board nominees proposed by ValueAct.</li>
<li>ValueAct, seeing their higher vote count as a modest success, sent a letter to Seven &amp; I, requesting a resumption of discussions despite the failed attempt to remove senior leadership.</li>
<li>We think the company is unlikely to seriously consider Value Act's proposals any longer, indicating the end of the investor activism campaign.</li>
</ul>

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

<ul>
<li>The potential spin-off listing of <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> Cloud faces significant challenges from various factors, making the timing particularly challenging for the spin-off.</li>
<li>The Cloud Business is experiencing intensifying price competition, while simultaneously facing substantial regulatory risks, particularly with the Chinese Government's plans to nationalize the cloud computing market.</li>
<li>Due to the ongoing price war and the potential risk of nationalization, we believe that <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba (ADR) (BABA US)</a> Cloud's fair value is substantially below $10bn.</li>
</ul>

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.

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Oshadhi Kumarasiri
Equity Analyst
• LightStream Research

China E-Commerce: Is Still a Dead Cat

Positive surprises in profitability in Q1 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the...

Oshadhi Kumarasiri

Alibaba IPOs, Freshippo IPO: Conflict of Interest Arising from Competition with Tmall Supermarket

Two key concerns for Freshippo's IPO are its failure to secure outside funding in two attempts last year and the potential conflict of interest...

Oshadhi Kumarasiri

Shopee Faces Decision on Brazil Amid Tax Changes

Sea Ltd's track record of accepting failures and closing businesses raises the likelihood of Shopee exiting the Brazilian market if they cannot...

Oshadhi Kumarasiri

Seven & I: ValueAct's Proposals Unlikely to Be Considered, Investor Activism Effectively Over

ValueAct, despite failed leadership removal attempt, requests discussions, but Seven & I is unlikely to consider proposals further, suggesting the...

Oshadhi Kumarasiri

Alibaba Cloud: Price War Rages as Nationalization Looms in China

The Cloud Business is experiencing intensifying price competition, while simultaneously facing substantial regulatory risks, particularly with...

Oshadhi Kumarasiri