Alibaba_Wendy
- 1. Alibaba The University of Texas at Dallas Chuan-Wen Tsai Wang-Chang, Tsai Yi-Chun, Cheng Heng, Lin Huishan Huang Wei Hung Lin
- 2. Introduction Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion Basic Information Ticker BABA Exchange NYSE Industry Specialty Retail, Other Sector Services Market Information 52 week price range $57.2-95.06 Market Cap $168,257.3(mm) Share Out. 2,512.4 Avg. Daily Volume 17.57 Float % 41.9% Institutional Ownership 26.98% Diluted EPS 4.11 Beta 1.34 TEV/LTM Revenue 11.6x TEV/LTM EBITDA 35.7x P/E 16.29 Forword P/E 3.01 ROE 34.7% Equity Owners
- 3. Recommendation Key drivers 1. Growing E-commerce demand 2. Diversified business 3. Improved logistic 4. Increased internet popularity in rural area 5. International operations Current price: $67.26 Target price: $76.2 BUY Recommendation Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion
- 4. Business description Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion • Founded by Chung Tsai and Yun Ma in 1999, China • Provide retail and wholesale trade online and on mobile; cloud computing and other services.
- 5. Business Strategy Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion Alibaba Wholesale platform that provides B2B service Tmall Third-party platform for brands and retailers that provides B2C service Taobao Retail platform that provides C2C service Flash sales 11/11 Singles Day
- 6. SWOT Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion STRENGTHS Largest online trading player in China B2B and C2C market leader Sufficient funding sources Mass information sources OPPORTUNITIES Potential US Market Thrive e-commerce future Growing internet utility THREATS Growing competitors New law restriction lack of a solid network security Global economic crises WEAKNESSES Illegal, counterfeit products Low brand recognition
- 8. Industry Overview Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion • China has transform form manufacturing-based economy to service-based economy • Government reduces tax, lower fees, improves administrative procedures, promotes high-tech companies • Results: Increasing consumer demand, growing sectors in telecommunications, e-commerce, and energy E-commerce Market in 2015
- 9. Industry Overview Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion • China’s e-commerce retail sales are expected to grow by 42.1% to US$672.01 billion and is expected to reach US$1.57 billion in 2018 • Account for over 40% of the global e-commerce retail market in 2015, estimated by eMarketer • China is the world’s leading e- commerce player • Mobile-commerce is predicted to reach US$333.99 billion in 2015, account for around half of China’s total retail e-commerce sales. Mobile-commerce sales in 2015
- 10. Porter Five Forces Analysis Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion Rivalry among Existing Firms High Threats of entrance of the new enterprises High Threats of substitute products or services High Bargaining power of Buyers High Bargaining Power of Suppliers Low
- 12. D/E ratio and Cash Flow Company Overview Conclusion Industry & Competitors Financial Analysis Valuation Risk Analysis Competitors -BIDU, EBAY, NTES, AMZN D/E ratio - Second low D/E ratio among its competitors - Less interest payment - Sound financial position Cash Flow - Positive CFO - Lowest days sales outstanding among all its opponents - Reinvest its earning faster than its competitors
- 13. ROE Company Overview Conclusion Industry & Competitors Financial Analysis Valuation Risk Analysis BABA BIDU EBAY NTES AMZN ROE 34.7% 19.5% 14.7% 24% 4.9% BABA BIDU EBAY NTES AMZN Profit Margin 73.1% 19.7% 20.1% 31.8% 0.6% Assets Turnover 0.3 0.6 0.3 0.6 1.8 Equity Multiple 1.58 1.65 2.44 1.26 4.54 DuPont Analysis
- 14. ROE Company Overview Conclusion Industry & Competitors Financial Analysis Valuation Risk Analysis
- 15. Valuation
- 16. Technical Analysis Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion Alibaba has experienced a long period of correction. The price is recovering from the support. We believe the price will bounce up more in the future.
- 17. Technical Analysis Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion The signal line is going to move up to cross above MACD, this could be a signal to buy.
- 18. DCF Industry & Competitors Financial Analysis Company Overview Valuation RiskAnalysis Conclusion Discounted Cash Flow Model • Three years forecast, one terminal year • Implied $62.05/share • However, we made assumptions that possibly make less precise price. We assigned 20% weighted to the final target price. WACC 8.7% Cost of Equity 10.12% Cost of Debt 5.23% Equity 76% Debt 24%
- 19. P/E EV/EBIT $75.54 50% 50%Weights for multipliers 2016 2016Forward years $70.01 $81.07Multipliers’ values Multipliers Forward P/E Valuation and Multipliers Pricing Company Overview Conclusion Industry & Competitors Financial Analysis Valuation Risk Analysis 2016E EPS 3.33 P/E ratio 25.2x Forward P/E Valuation Multipliers Pricing $83.9
- 20. $76.2 DCF analysis 20% Multiples analysis 40% Target price Company Overview Conclusion Industry & Competitors Financial Analysis Valuation Risk Analysis Year-end target price Upside : 13.27% Forward P/E analysis 40% $62.05 $75.54 $83.9
- 21. Risk Analysis
- 22. Main risks Company Overview Conclusion Industry & Competitors Financial Analysis Valuation Risk Analysis Fluctuation of exchange rates - The functional currency of the Company is the United States Dollar ("US$") and reporting currency of the Company is Renminbi ("RMB"). - Gains and losses arising from foreign currency translations Operating risk - Illegal, counterfeit products - Reputation damage - Face lawsuits - Assurance program
- 23. Conclusion
- 24. Company Overview Industry & Competitors Financial Analysis Valuation Risk Analysis Conclusion Conclusion 12 M Target price Upside potential $76.2 13.27% Sound financial position BUY Positive return Diversified business Growing E-commerce demand