Posts tagged " e-commerce "

Alibaba Group Holding Ltd ADR (BABA N) Extended Graph Analysis

April 3rd, 2020 Posted by Extended Analysis No Comment yet

Company Profile

BABA logo

Alibaba Group Holding Ltd Company is a Chinese multinational online company. Specializing in e-commerce, retail, internet and technology. Founded by Jack Ma on 4 April 1999 in Hangzhou, Zhejiang. Alibaba is a public company and traded as NYSE: BABA.

 

Alibaba Group Holding Ltd ADR (BABA N) Extended Graph Analysis

 

1. BABA CASH FLOWS

BABA CASH FLOWS

2015 2016 2017 2018 2019 2020
Net cash provided by operating activities 41,217,000,000 56,836,000,000 80,326,000,000 125,171,000,000 150,975,000,000 196,996,000,000
Net cash used for investing activities -53,454,000,000 -42,831,000,000 -78,364,000,000 -83,890,000,000 -151,060,000,000 -97,828,000,000
Net cash provided by (used for) financing activities 87,497,000,000 -15,846,000,000 32,914,000,000 20,359,000,000 -7,392,000,000 68,605,000,000
Capital expenditures -7,705,000,000 -10,845,000,000 -17,546,000,000 -29,836,000,000 -49,643,000,000 -49,643,000,000
Free cash flow 33,512,000,000 45,991,000,000 62,780,000,000 95,335,000,000 101,332,000,000 147,353,000,000
Working capital 102,437,000,000 82,031,000,000 88,745,000,000 121,045,000,000 62,604,000,000 62,604,000,000

Facts:

  • Cash provided by operating activities was CNY 196.996 billion in 2020.
  • Cash used for investing activities were CNY -97.8 in 2020.
  • Net cash provided by financing activities was CNY 68.605 billion in 2020.
  • Capital expenditure was CNY -49.6 billion in 2020.
  • Free cash flow was CNY 147 billion.
  • Working capital was CNY 62.6 billion in 2020.

Explanation

  • Cash from operations was increasing year-over-year and has a growth rate of 378 percent in five years.
  • Cash from investing activities were purchases of property, plant and equipment, acquisitions and purchases of investments.
  • Cash provided by (used for) financing activities were debt repayment and common stock repurchase.
  • Capital expenditures were purchases of property, plant and equipment and purchases of intangibles.
  • Free cash flow increases year-over-year and has a growth rate of 340% in five years.
  • Working capital was erratic in movement in the last five years.

Interpretation

Alibaba was capable and efficient in maintaining a positive cash from operations, free cash flow and working capital in the last five years. 

 

2. BABA BALANCE SHEET

BABA BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 125,999,000,000 115,696,000,000 150,801,000,000 210,210,000,000 203,165,000,000
Current Assets 142,109,000,000 134,070,000,000 182,516,000,000 256,855,000,000 270,273,000,000
Net property, plant and equipment 12,244,000,000 16,505,000,000 24,897,000,000 75,866,000,000 98,449,000,000
Total non-current assets 113,325,000,000 230,380,000,000 324,296,000,000 460,269,000,000 694,803,000,000
Total assets 255,434,000,000 364,450,000,000 506,812,000,000 717,124,000,000 965,076,000,000
Current liabilities 39,672,000,000 52,039,000,000 93,771,000,000 135,810,000,000 207,669,000,000
Non-current liabilities 70,323,000,000 95,424,000,000 134,242,000,000 215,492,000,000 265,150,000,000
Total liabilities 109,995,000,000 147,463,000,000 228,013,000,000 351,302,000,000 472,819,000,000
Retained earnings 24,842,000,000 78,752,000,000 108,558,000,000 172,353,000,000 257,886,000,000
Stockholders equity 145,439,000,000 216,987,000,000 278,799,000,000 365,822,000,000 492,257,000,000

Facts:

  • Total cash was CNY 203 billion in 2019.
  • Current assets were CNY 270 billion in 2019.
  • Net property, plant and equipment was CNY 98 billion in 2019.
  • Non-current assets were CNY 695 billion in 2019.
  • Total assets were CNY 965 billion in 2019.
  • Current liabilities were CNY 208 billion in 2019.
  • Non-current liabilities were CNY 265 billion in 2019.
  • Total liabilities were CNY 473 billion in 2019.
  • Retained earnings were CNY 258 billion in 2019.
  • Stockholders equity was CNY 492 billion in 2019.

Explanation

  • Cash was increasing year-over-year and has a growth rate of 61% in five years. It represents 21 percent of the total assets.
  • Current assets represent 28 percent of total assets and have a growth rate of 90 percent in five years.
  • Net property plant and equipment represents 10 percent of total assets. It grew 704 percent in five years.
  • Non-current assets was 72 percent of total assets and it grew 513 percent in five years.
  • Total assets grew 278 percent in five years.
  • Current liabilities represent 44 percent of total liabilities.
  • Non-current liabilities represent 56 percent of total liabilities.
  • Total liabilities represents 49 percent of total equities and liabilities.
  • Retained earnings represent 52 percent of total equities.
  • Stockholders equity represents 41 percent of total equities and liabilities.

Interpretation

The balance was strong and in good health. The company was efficient in maintaining a solid balance sheet in the last five years. 

 

3. BABA INCOME AND MARKET

BABA INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 76,204,000,000 101,143,000,000 158,273,000,000 250,266,000,000 376,844,000,000 488,895,000,000
EBIT 23,637,000,000 29,958,000,000 48,055,000,000 70,363,000,000 57,750,000,000 94,306,000,000
Net Income 24,261,000,000 71,460,000,000 43,675,000,000 64,985,000,000 87,886,000,000 172,126,000,000
EBITDA 39,491,000,000 90,115,000,000 76,992,000,000 125,989,000,000 138,491,000,000 212,655,000,000
Market Capitalization 0 1,356,753,374,878 2,601,380,048,653 2,601,380,048,653 3,231,462,292,833 3,231,462,292,833
Intrinsic Value 0 0 5,454,154,281,120 7,219,369,371,316 13,772,141,627,743 12,164,643,972,274

Facts:

  • Revenue was CNY 489 billion in 2020.
  • EBIT was CNY 94 billion in 2020.
  • Net Income was CNY 172 billion in 2020.
  • EBITDA was CNY 213 billion in 2020.
  • Market capitalization was CNY 3 trillion in trailing twelve months.
  • The calculated intrinsic value was CNY 12 trillion in trailing twelve months.

Explanation:

  • Revenue increases year-over-year and has grown 542 percent in five years.
  • EBIT has a growth of 299 percent in five years.
  • Net income grew 609 percent in five years.
  • Market capitalization increased year-over-year and grew 138 percent in five years.
  • Intrinsic value was over 276 percent against market capitalization, therefore market price was undervalued.

Interpretation

Alibaba was profitable in the last five years. The management was able to generate more than enough revenue for the operation of the business.

 

4. BABA FINANCIAL RATIOS

BABA FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 0.42 0.33 0.36 0.4 0.45 0.43
Return on assets % 13.16 23.06 10.03 10.46 10.41 15.37
Return on equity % 27.63 39.43 17.62 19.85 20.42 28.54
Debt/Equity 0.35 0.25 0.28 0.33 0.23 0.16
Return on invested capital % 13.99 11.08 12.13 9.72 9.89 12.16
Interest coverage 12.72 42.86 23.47 29.16 19.54 37.63

Facts:

  • Asset turnover was averaging 0.43 in 2020.
  • Return on assets was 15.37 percent in 2020.
  • Return on equity was 28.54 percent in 2020.
  • Debt/Equity ratio was 0.16 in 2020.
  • Return on invested capital was 12.16 percent in 2020.
  • Interest coverage was 37.63 in 2020.

Explanation

  • Asset turnover indicates that for every $1 in asset, the company generates 0.43 CNY.
  • Return on assets indicates that the company produces .15 CNY of net income for every CNY invested in assets.
  • Return on equity indicates that for every CNY invested in equity, it earns .2854 CNY net income.
  • Debt/Equity ratio indicates that for every CNY in equity, the company has .16 CNY in leverage.
  • Return on invested capital means the company earns .12 CNY profit for its invested capital.
  • Interest coverage means that the company can afford to pay its interest payment 38 times of its current financial obligations.

Interpretation

The financial ratios show that the company is managed very well from its business operations. The company is profitable.

 

5. BABA KEY EXECUTIVE

NAME TITLE
Sophie Minzhi WU Chief Customer Officer
Timothy A. Steinert General counsel and Corporate Secretary
Luyuan Fan Pres, Alibaba Digital Media and Entertainment
J. Michael Evans Director and President
Shan Trudy Dai President Wholesale Marketplaces
Jeff Jianfeng Zhang Chief Technology Officer and President
Junfang Jessie Zheng Chief Risk Officer and Chief Platform Governance Officer
Pen-Hung Chris Tung Chief Marketing Officer
Judy Wenhong Tong Chief People Officer

Facts:

Alibaba does not reveal the key executive compensation.

 

6. BABA LOBBYING AND CONTRIBUTIONS

BABA LOBBYING AND CONTRIBUTIONS

Period USD
2011 100,000
2012 461,000
2013 430,000
2014 450,000
2015 410,000
2016 1,020,000
2017 2,010,000
2018 2,740,000
2019 2,620,000

Facts:

Alibaba has been spending annual lobbying and contributions since 2011. The figures vary  every period. A Note from OpenSecrets is quoted as follows:

NOTE: Figures on this page are calculations by the Center for Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on January 23, 2020 and includes spending from January 1 – December 31. Prior years include spending from January through December.

Source: OpenSecret.org Center for Responsive Politics

 

7. BABA FINANCIAL STRENGTH

BABA FINANCIAL STRENGTH

DATA CNY
Working capital 62,604,000,000
Total assets 965,076,000,000
Sales 488,895,000,000
EBIT 94,306,000,000
Market value of equity 3,404,603,312,500
Book value of total liabilities 472,819,000,000
Retained earnings 257,886,000,000

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets 0.06 1.2 0.08
B – Retained Earnings / Total Assets 0.27 1.4 0.37
C – EBIT / Total Assets 0.10 3.3 0.32
D – Market Value of Equity / Book Value of Total Liabilities 7.20 0.6 4.32
E – Sales / Total Assets 0.51 1 0.51
Z-Score 5.60


Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Explanation:

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

Alibaba. has a Z-Score of 5.60. Dr. Altman’s grading scale of 3.0 and above indicates that the company will not declare bankruptcy in near future. In other terms, the company is not close to insolvency. The main factors of this statistical measurement are profitability, liquidity, leverage and efficiency.

Overview

Alibaba Group Holding Ltd ADR has a strong balance sheet and is financially healthy. The income statement shows that the company was profitable and liquid. The stock price of Alibaba was undervalued, therefore, could be a good Buy.

CITATION

https://www.morningstar.com/stocks/xnys/baba/quote

https://www.opensecrets.org/federal-lobbying/clients/summary?cycle=2011&id=D000064488

https://www.alibabagroup.com/en/global/home

Researched and written by Criselda

 

PepsiCo Inc (PEP) Extended Graph Analysis

March 5th, 2020 Posted by Extended Analysis No Comment yet

Company Profile

PEP logo

PepsiCo is leading in the food and beverage multinational company, well known for its product diversification selling products in around 200 countries and territories. Their products caters to the tastes of their customers young and adults. They faced the challenge of providing their consumers nutritious food and beverages. Its main competitors is The Coca-Cola Company.

PepsiCo was founded by Caleb Bradham, headquartered in Purchase, Harrison, New York, United States. It is a public company registered under NASDAQ with ticker symbol PEP.

 

PepsiCo (PEP) Extended Graph Analysis

 

1. PEP CASH FLOW

PEP CASH FLOW

2015 2016 2017 2018 2019 TTM
Net cash flow provided by operating activites 10,580,000,000 10,404,000,000 9,994,000,000 9,415,000,000 9,649,000,000 9,649,000,000
Net cash used for investing activities -3,569,000,000 -7,148,000,000 -4,403,000,000 4,564,000,000 -6,437,000,000 -6,437,000,000
Net cash provided by (used for) financing activities -3,828,000,000 -2,942,000,000 -4,186,000,000 -13,769,000,000 -8,489,000,000 -8,489,000,000
Capital expenditure -2,758,000,000 -3,040,000,000 -2,969,000,000 -3,282,000,000 -4,232,000,000 -4,232,000,000
Free cash flow 7,822,000,000 7,364,000,000 7,025,000,000 6,133,000,000 5,417,000,000 5,417,000,000
Working Capital 5,453,000,000 5,954,000,000 10,525,000,000 -245,000,000 -2,816,000,000 -2,816,000,000

Facts:

  • Cash from operating activities was $9.649 billion in the trailing twelve months.
  • Cash used for investing activities was -$6.437 billion in the trailing twelve months.
  • Net cash from financing activities was -$8.489 billion in the trailing twelve months.
  • Capital expenditure was -$4.232 billion in the trailing twelve months.
  • Free cash flow was $5.417 billion in the trailing twelve months.
  • Working capital was -$2.816 billion in the trailing twelve months.

Explanation:

  • Cash from operating increased 2.49% from 2018 to trailing twelve months.
  • Investing activities were purchase of property, plant and equipment and acquisitions.
  • Financing activities were debt repayment, common stock repurchased and dividend payments.
  • Capital expenditure was investment in property, plant and equipment.
  • Free cash flow decreased 12 percent from 2018.
  • Working capital was negative from 2018, current liabilities were higher than the current assets.

Interpretation

The company was able to provide cash from its operating activities in the last five years. PEP had a number of business acquisitions in recent years as one of their strategic moves.

 

2. PEP BALANCE SHEET

PEP BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 12,009,000,000 16,125,000,000 19,510,000,000 8,993,000,000 5,738,000,000
Current Assets 23,031,000,000 27,089,000,000 31,027,000,000 21,893,000,000 17,645,000,000
Net property, plant and equipment 16,317,000,000 16,591,000,000 17,240,000,000 17,589,000,000 20,853,000,000
Total non-current assets 46,636,000,000 47,040,000,000 48,777,000,000 55,755,000,000 60,902,000,000
Total assets 69,667,000,000 74,129,000,000 79,804,000,000 77,648,000,000 78,547,000,000
Current liabilities 17,578,000,000 21,135,000,000 20,502,000,000 22,138,000,000 20,461,000,000
Non-current liabilities 40,166,000,000 41,899,000,000 48,413,000,000 40,992,000,000 43,300,000,000
Total liabilities 57,744,000,000 63,034,000,000 68,915,000,000 63,130,000,000 63,761,000,000
Retained earnings 50,472,000,000 52,518,000,000 52,839,000,000 59,947,000,000 61,946,000,000
Stockholders equity 11,923,000,000 11,095,000,000 10,889,000,000 14,518,000,000 14,786,000,000

Facts:

  • Total cash was $5.738 billion in 2019.
  • Current assets were $17.645 billion in 2019.
  • Net property, plant and equipment was $20.853 in 2019.
  • Total non-current assets were $60.902 billion in 2019.
  • Total assets were $78.547 billion in 2019.
  • Current liabilities were $20.641 billion in 2019.
  • Non-current liabilities were $43.300 in 2019.
  • Total liabilities were $63.761 in 2019.
  • Retained earnings were $61.946 in 2019.
  • Stockholders equity was $14.786 in 2019

Explanation:

  • Total cash represents 7.31% of total assets.
  • Current assets represent 22.46% of total assets.
  • Net property, plant and equipment represents 26.55% of total assets.
  • Total non-current assets represent 77.54% of total assets.
  • Total assets grew 13% in five years.
  • Current liabilities represent 32% of total liabilities.
  • Non-current liabilities represent 68% of total liabilities.
  • Total liabilities represents 81% to total liabilities and equity.
  • Stockholder equity represents 19% of total liabilities and equity.

Interpretation

The company is highly leveraged, using four-fifth of creditors money in its business operation, nearly 20% of investors money is utilized in the operation. In other words, the creditors have more stake than the investors. 

 

3. PEP INCOME AND MARKET

PEP INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 63,056,000,000 62,799,000,000 63,525,000,000 64,661,000,000 67,161,000,000 67,161,000,000
EBIT 9,712,000,000 9,785,000,000 10,509,000,000 10,110,000,000 10,291,000,000 10,291,000,000
Net Income 5,452,000,000 6,329,000,000 4,857,000,000 12,515,000,000 7,314,000,000 7,314,000,000
EBITDA 10,828,000,000 12,263,000,000 13,122,000,000 13,113,000,000 12,879,000,000 12,879,000,000
Market Capitalization 144,684,000,000 150,059,000,000 170,543,000,000 155,666,000,000 190,108,000,000 197,550,000,000
Intrinsic Value 209,836,396,353 745,025,154,189 839,073,420,473 2,631,653,205,144 4,029,094,790,996 4,718,747,139,220

Facts:

  • Revenue was $67.161 billion in trailing twelve months.
  • EBIT was $10.291 billion in the trailing twelve months.
  • Net income was $7.314 billion in the trailing twelve months.
  • EBITDA was $12.879 billion in the trailing twelve months.
  • The market capitalization was $197.550 billion.
  • Intrinsic value was $4.719 trillion in the trailing twelve months.

Explanation:

  • Revenue grew 7% in five years and from 2018 it grows 3.87%.
  • EBIT grew 6% in five years and shows an increase of 1.79% from 2018.
  • Net income grew 34% in five years. It has a negative growth of 41.56% from 2018.
  • EBITDA grew 19% in five years. It has a negative growth from 2018 at 1.78%.
  • Market capitalization was erratic in movement in the last five years and it increased 4% from 2019 to the last quarter.
  • The calculated intrinsic value shows a very high value at $4.719 trillion.

Interpretation

The company is investing heavily in advertising and marketing, the reason its sales, general and administrative expense was high at 72% of gross profit which impacted the net income.

 

4. PEP FINANCIAL RATIOS

PEP FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 0.90 0.87 0.83 0.82 0.86 0.86
Return on assets % 7.77 8.79 6.31 15.89 9.37 9.37
Return on equity % 37.20 55.14 44.32 98.66 49.92 49.92
Debt/Equity 2.46 2.72 3.12 1.95 1.97 1.97
Return on invested capital % 13.38 15.55 11.00 27.64 17.11 17.11
Interest coverage 8.67 7.37 9.34 7.03 9.20 9.20

Facts:

  • Asset turnover was 0.86 in the trailing twelve months.
  • Return on asset was 9.37% in the trailing twelve months.
  • Return on equity was 49.92% in the trailing twelve months.
  • Return on invested capital was 17.11% in the trailing twelve months.
  • Interest coverage was 9.20 in the trailing twelve months.

Explanation:

  • Asset turnover means that the company is generating $0.86 of sales for every $1 investment in assets.
  • Return on assets means for every $1 invested in assets the company generates 9.37 cents of net income.
  • Return on equity indicates that for every $1 of shareholders equity, PEP generated 49 or 50 cents in profit.
  • Return on invested capital indicates that the invested capital yielded 17.11 percent of return.
  • Interest coverage indicates that the company earns 9 times earnings than its current interest payment.

Interpretation

The company’s financial ratios show acceptable ratios. The company is liquid

 

5. PEP KEY EXECUTIVE COMPENSATION

PEP KEY EXECUTIVE COMPENSATION

Name/Title 2014 2015 2016 2017 2018
Key Executive Compensation 37,399,250 48,405,262 56,275,124 63,116,455 65,489,721
Indra K. Nooy/ Chairman of the Board and Chief Executive Officer 22,485,574 26,444,990 29,783,416 31,082,648 24,491,117
Ramon L Laquarta/Chairman of the Board and CEO 5,655,039 6,113,574 10,157,245 10,827,396
Albert P. Carey/CEO North America 7,712,149 7,744,388 10,071,299 10,160,310 7,868,118
Laxman Narasimhan/Global Chief Commercial Officer and CEO Latin America 7,009,990
Silviu Popovici/CEO Europe Sub Saharan Africa 6,151,034
Hugh F. Johnston/Vice Chairman, Executive Vice President and Chief Financial Officer 7,201,527 8,560,845 10,306,835 11,716,252 9,142,066

Facts:

  • The key executive compensation was $65,489,721 in 2018.
  • The CEO compensation was $24,491,117 in 2018.
  • Chairman of the Board and CEO compensation was $10,827,396 in 2018.
  • CEO North America compensation was $7,868,118 in 2018.
  • Chief Commercial Officer and CEO Latin America compensation was $7,009,990 in 2018.
  • CEO Europe Sub Saharan Africa compensation was 6,151,034 in 2018.
  • Vice Chairman, Executive Vice President and Chief Financial Officer compensation was $9,142,066 in 2018.

Explanation:

  • The total key executive compensation represents 0.90% of net income.
  • CEO compensation represents 37.40% of the total key executive compensation.
  • Chairman of the Board and CEO compensation represents 16.53% of the total key executive compensation.
  • CEO North America compensation represents 12% of the total key executive compensation.
  • Chief Commercial Officer and CEO Latin America compensation represents 11% of the total key executive compensation.
  • CEO Europe Sub Saharan Africa compensation represents 9.39% of the total key executive compensation.
  • Vice Chairman, Executive Vice President and Chief Financial Officer compensation represents 14% of the total key executive compensation.

Interpretation

The company’s key executive compensation represents 0.90% of the net income.

 

6. PEP LOBBYING AND CONTRIBUTIONS

PEP LOBBYING AND CONTRIBUTIONS

Period USD Period USD
1998 960,000 2009 9,373,000
1999 1,300,000 2010 6,874,800
2000 1,320,000 2011 3,260,000
2001 1,035,000 2012 3,330,000
2002 960,000 2013 3,720,000
2003 860,000 2014 3,510,000
2004 720,000 2015 4,470,000
2005 740,000 2016 3,140,000
2006 880,318 2017 2,880,000
2007 1,000,636 2018 3,470,000
2008 1,096,000 2019 3,490,000

Explanation:

PepsiCo has been spending annual lobbying and contributions since 1998. The amount varies annually. NOTE: Figures on this page are calculations by the Center for Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on January 23, 2020 and includes spending from January 1 – December 31. Prior years include spending from January through December.

Source: OpenSecret.org Center for Responsive Politics

 

6. PEP FINANCIAL STRENGTH

PEP FINANCIAL STRENGTH

DATA

Working capital -$2,816,000,000
Total assets $78,547,000,000
Sales $67,161,000,000
EBIT $10,291,000,000
Market value of equity $197,550,000,000
Book value of total liabilities $63,761,000,000
Retained earnings $61,946,000,000

 

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets -0.0359 1.20 -0.04
B – Retained Earnings / Total Assets 0.79 1.40 1.10
C – EBIT / Total Assets 0.13 3.30 0.43
D – Market Value of Equity / Book Value of Total Liabilities 3.10 0.60 1.86
E – Sales / Total Assets 0.86 1.0 0.86
Z-Score 4.21

 

Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

 

Explanation

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

The overall Z-Score of PEP was 4.21, the grading scale for 3.00 and over according to Altman indicates that the company will not declare bankruptcy. This measurement is not calculated for the purpose of estimating the company will declare bankruptcy but it helps in comparing other companies that have become insolvent.

Conclusion

PepsiCo was liquid and has great potential for accelerating its revenue in the long run due to its diversification strategy. The company manufactures and sells a variety of food and beverages that caters to young people and adults. Although the company is highly leveraged, PEP is stable and has a strong financial strength.

CITATION

https://www.opensecrets.org/federal-lobbying/firms/summary?cycle=1998&id=D000000200

https://www.pepsico.com/about/about-the-company

https://www.morningstar.com/stocks/xnas/pep/quote

Researched and written by Criselda

alibaba

What Are You Actually Buying With Alibaba Group Holdings Limited (BABA)?

November 23rd, 2015 Posted by Investment Valuation No Comment yet
Alibaba Group Holding Limited (BABA) is a Chinese multinational conglomerate specializing in e-commerce, retail, Internet, and technology. Wikipedia

Alibaba has marked an amazing record of Singles’ Day sales of $14.3 billion (91.2 billion Yuan) on November 11, 2015. BABA is a super online and mobile marketplace around the globe. This giant company is contributing a lot to the economy of the People’s Republic of China (PRC) with regards to its success and high growth. The company has an attractive return on equity at 29.97 and has a huge potential for more future growth. However, Alibaba Group had a different corporate legal structure and ownership structure.

Furthermore, the company is using the “variable interest entity” (VIE) structure. In 2000, this structure was created to bypass PRC’s restrictions in certain industries like communications and technology. We have provided a graphic presentation, illustration, and interpretation of this corporate and ownership structure for easy understanding. It will help you understand the flow of ownership. Find out in this article what investors are really buying in the shares of Alibaba Group China in the initial public offering in the United States.

Company Research

Alibaba

Problem

Alibaba Group Holdings Limited is experiencing a counterfeit problem. Jack Ma said, that, the sale of one fake product could lead to a loss of five customers. Further, Ma said, fighting against counterfeits is not a matter for BABA as they are servicing in different parts of the globe.

Effect

  • Counterfeit problems affect Alibaba and also the Chinese economy according to Xinhua.
  • The company is spending additional expenditures, hundreds of million Yuan, in tracking and fighting counterfeits, according to Jack Ma in an interview with Xinhua.
  • In addition, BABA is also spending on refunding and compensating for their customers who bought counterfeits products.

Cause

According to Jack Ma, counterfeits could fundamentally damage the Chinese manufacturing sector. Further, Jack Ma said, “It leaves visible wounds on Alibaba, but it could severely affect the economic transition”.

Solutions

  • Shops involved with counterfeit products are closed according to Jack Ma.
  • Alibaba is tracking and fighting these counterfeit attack.
  • According to Jack Ma, improving Chinese laws could help honest businesses to build competitive brands.
  • The company is monitoring the sale of counterfeit products and kept the market watchdog informed, according to Jack Ma.
  • Further, the counterfeit issue can only be solved with the help of the internet and big data, Ma stated. He further stated that in the company’s internet, they have an evaluation system for the goods.
  • And with big data, they can locate those who produce and sell counterfeits.

About the Company

Company Profile

Alibaba Group Holding Limited (BABA) is a super online and mobile marketplace around the globe by revenue. BABA is the Cayman Islands holding company operating in China through its subsidiaries and variable interest entities (VIE) as a whole, engaged in online and mobile commerce activities of buy and sell of products, services, and technology. The giant company helps small businesses to communicate and connect with their consumers by their technology services and online marketplace. Further, they believed that small businesses have all the chance to grow and prosper by making it easy for them to do business online.

BABA have maintained their culture since the founding of the company and it has been the key to its success. The company cares and look with the interests of its customers and employees. Mr. Jack Ma sees to it that every policy they make with regards to the business, the customer’s concerns come first. Ma is responsible for the company’s strategic plans, culture, and customers concerns.

Company History

Its first website is English-language Alibaba.com, a global wholesale marketplace. On June 2011, Taobao Mall (currently known as Tmall.com) is spun off from Taobao Marketplace as an independent platform. On July 2005 Aliwangwang, a personal computer-based instant messaging tool that facilitates text, audio, and video communication between buyers and sellers, is launched on Taobao Marketplace.

Special Events

2014

October 2014, Taobao travel becomes an independent platform and is a brand named “Alitrip”.
Ant Financial Services Group, a related company of Alibaba Group previously known as Small and Micro Financial Services Company, was formally established.
September 2014 Alibaba Group goes public on the New York Stock Exchange (NYSE).
July 2014 Completes its investment in digital mapping company AutoNavi.
Establishes a joint venture with Intime to develop a 020 business in China.
June 2014 The company completes the full acquisition and integration of mobile browser company UCWeb.
The company starts offering mobile virtual network operators (MVNO) services in China under the All Telecom brand.
Completes acquisition of an approximately 60% stake in movie and television program producer ChinaVision (currently known as Alibaba Pictures Group).
February 2014 Tmall Global is officially launched as an extension of Tmall.com to enable international brands to offer products directly to consumers in China.

2010 – 2013

Sep 2013 Alibaba Group officially launches its mobile social networking app, Laiwang.
Aug 2013 Relocates its campus to Xixi District in Hangzhou.
Jul 2013 Unveils the Alibaba Smart TV OS.
May 2013 Taobao’s 10th anniversary is marked with a global gathering of Alibaba Group employees in Hangzhou.
Sep 2012 Completes an initial repurchase of shares from Yahoo! In a restructuring of the companies’ relationship.
Jan 2012 Establishes the Alibaba Foundation with a sizeable fund dedicated to social causes.
Nov 2010 Alibaba.com announces the acquisition of One-touch, a provider of one-stop services for exporters in China.
Aug 2010 The Mobile Taobao App is launched.
Jul and Aug 2010 Alibaba.com acquires Vendio and Auctiva, providers of e-commerce solutions to US small businesses.
July 2010 The Alibaba Partnership is established to ensure the sustainability of the Alibaba Group mission, vision, and values.
May 2010 Announces that it will earmark 0.3% of its annual revenue to fund efforts designed to spur environmental awareness and conservation in China and around the world.
Apr 2010 Officially launches AllExpress to enable exporters in China to reach and directly transact with consumers around the world.
Mar 2010 Renames its China marketplace 1688.com
Taobao Marketplace introduces online group buying marketplace Juhuasuan.

2005-2009

Sep 2009 Alibaba Cloud Computing (currently known as AliCloud) is established in conjunction with Alibaba Group 10th anniversary celebration.
Alibaba.com announces the acquisition of HiChina, China’s leading internet infrastructure service provider.
Sep 2008 Alibaba Group R&D Institute is established.
Ap 2008 Taobao Mall (currently known as Tmall.com), a dedicated platform for third-party brands and retailers, is introduced to compliment Taobao Marketplace.
Nov 2007 Alibaba Group launches Alimama, an online marketing technology platform.
Alibaba.com completes its initial public offering on the Main Board of the Hong Kong Stock Exchange.
Jul 2006 The Taobao University program is launched, providing e-commerce trading and education to buyers and sellers.
Oct 2005 Takes over the operations of China Yahoo!.
Aug 2005 Form a strategic partnership with Yahoo!

2001-2004

Dec 2004 Alipay, currently a related company of Alibaba Group, is launched as a third-party online payment platform.
Jun 2004 Alibaba Group organizes its first Nentrepreneur Summit, a gathering of internet entrepreneurs, and honors the first 10 Netrepreneurs of the Year.
Feb 2004 The company raises USD82 million from several first-tier investors in the largest private equity commitment ever in the Chinese Internet sector.
May 2003 Online shopping website Taobao Marketplace is founded, again in Jack Ma’s apartment.
Alibaba Group continues to operate in spite of the SARS epidemic and quarantine measures that prevent staff from coming to work.
Dec 2002 Alibaba Group becomes cash flow positive for the year.
Dec 2001 Alibaba.com surpasses 1 million registered users
Outlines its mission and corporate values.

1999-2000

Sep 2000 Alibaba Group organizes the first West Lake Summit, a gathering of internet business and thought leaders.
Jan 2000 Organizes the first West Lake Summit, a gathering of internet business and thought leaders.
Oct 1999 Raises USD 5 million from a consortium of investors
1999 Launches a China marketplace (currently known as 1688.com) for domestic wholesale trade
1999 Established by its 18 founders led by Jack Ma, working out of Jack Ma’s apartment in Hangzhou

Source: Alibaba website

The Company’s significant subsidiaries:

  • Taobao Holding Limited, an exempted company incorporated with limited liability, under the laws of the Cayman Islands. In addition, it is a wholly-owned subsidiary and also the indirect holding company of the PRC subsidiaries relating to the company’s Taobao Marketplace and Tmall platform.
  • Taobao China Holding Limited, a Hong Kong limited liability company. It is the direct wholly owned subsidiary of Taobao Holding Limited. In addition, it is the direct holding company of the PRC subsidiaries relating to the company’s Taobao Marketplace and Tmall platform. Furthermore, it is an operating entity for the overseas business of the company’s Taobao Marketplace and also Tmall  Global.
  • Taobao (China) Software Co. Ltd., a limited liability company incorporated under the laws of PRC. It is the indirect subsidiary of Taobao Holding Limited, and also a wholly foreign-owned enterprise. In addition, it provides software and also technology services for the company’s Taobao Marketplace.
  • Zhejiang Small Technology Co., Ltd., a liability company incorporated under the laws of the PRC. It is an indirect subsidiary of Taobao Holding Limited and also a wholly-foreign owned enterprise. Furthermore, it provides software and also technology services for the company’s Small platform.

More of Company’s Subsidiaries

  • Alibaba.com Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands. It is the company’s wholly-owned subsidiary and the indirect holding company of the PRC subsidiaries relating to the company’s Alibaba.com, 1688.com and AliExpress businesses.
  • Moreover, Alibaba.com Investment Holding Limited, a company incorporated with limited liability under the laws of the British Virgin Islands. It is the direct wholly owned subsidiary of Alibaba.com Limited. In addition, it is also a lower level holding company of the PRC subsidiaries relating to the company’s Alibaba.com, 1688 and AliExpress businesses.
  • Alibaba Investment Limited, a company incorporated with limited liability under the laws of the British Virgin Islands. It is the company’s wholly-owned subsidiary and the principal holding company for the company’s strategic investments.

Source: Form 20-F Alibaba Group Holding Limited

Date of Incorporation

Alibaba Group Holding Limited was incorporated in the Cayman Islands on June 28, 1999.

Place/Head Office

The registered office of the company is located at Trident Trust Company (Cayman) Limited, 4th floor, One Capital Place, P.O. Box 847, George Town Grand Cayman, Cayman Islands.

The Headquarters is located at 969 West Wen Yi Road, Yu Hand District, Hangzhou 311121, People’s Republic of China.

Telephone Number: +86-571-8502-2077

The service company office in the US is located at 1180 Avenue of the Americas, Suite 210, and New York, New York 10036.

Company’s website: www.alibabagroup.com

Founder/Founding

Alibaba Group Holdings Limited was founded on June 28, 1999, by a group of 18 people headed by Mr. Jack Ma, a former English teacher from Hangzhou, China.  It all started when Jack Ma founded Alibaba.com, a website that connects Chinese manufacturers with overseas buyers, a business to the business portal, in 1999.

Branches

Alibaba Group Holdings Limited is operating worldwide through the internet doing services like online shopping.

Date of IPO

Alibaba Group Holdings Limited started its Initial Public Offering (IPO) on September 19, 2014, in which the company had sold 368,122,000 ADSs, with the proceeds of $10 billion. The company is listed on the New York Stock Exchange (NYSE) with a ticker symbol BABA. Registered in the United States after Jack Ma could not achieve status with Hong Kong regulators.

Other Significant Company Information

  • A total of 34,985 full-time employees as of March 2015 are based in China.
  • Alibaba is recently involved in medical industry chain as compared with BIDU and Tencent. The company has better internet resources in online medical care, which could give a head start in cultivating more products, according to Xinhua news agency.
  • Simon Xie, one of the founders of Alibaba Group Holdings Limited, Vice President of China Investment team.
  • Jack Ma tried to raise funds with Silicon Valley but rejected because his business model was unprofitable. However, Goldman Sachs and SoftBank invested $5 million and $20 million, respectively in Alibaba Group.

Material Events Affecting the Numbers

MAJOR SHAREHOLDERS

BABA Major shareholders

The table above presents the major shareholders of Alibaba Group Holdings Limited with respect to beneficial ownership of the company’s ordinary shares. 

Facts:

  • Jack Ma owned 190.67 million ordinary shares at 7.6 percent of the total ordinary shares.
  • Joseph Tsai owned 78.4 million ordinary shares at 3.1 percent.
  • Softbank owned 797.7 million ordinary shares at 31.80 percent.
  • Yahoo! owned 383.57 million ordinary shares at 15.30 percent.
  • All directors and executive officers as a group owned 328.5 ordinary shares at 13.10 percent.

Explanation

  • It represents 2,033,177 ordinary shares held directly by Jack Ma.
  • Tsai has 35 million shares held by APN Ltd, a Cayman Islands company. In addition, Jack Ma holds 70 percent equity interest in the Cayman Islands.
  • Ordinary shares held directly by Tsai was 1,437,964.
  • While 15 million ordinary shares held by APN Ltd. in which Tsai holds a 30 percent equity interest.
  • SoftBank Corp. owned 466,826,180 ordinary shares, and also 15 million ordinary shares owned by SBBM Corporation (Tokyo). In addition, 315,916,800 ordinary shares owned by SB China Holdings Pte Ltd (Singapore).
  • Yahoo! Inc. (USA) owned 92,626,716 ordinary shares, and also 290,938,700 ordinary shares owned by Yahoo! Hong Kong Limited.
  • The ordinary shares outstanding as of June 23, 2015, were 2,512,427,504 shares.
  • The 1,015,779,482 ordinary shares at 40.4 percent of the company’s total outstanding shares were held by 159 record shareholders in the US.
  • The number of beneficial owners of the companies American Depository Shares (ADSs) in the US is much greater than the number of record holders of the company’s ordinary shares in the US.

Interpretation

Jack Ma owns only 7.6 percent ownership interest in the company. Investors from Alibaba IPO will not have direct ownership of Alibaba Group Holdings Limited instead, will only have a claim to the profits of the Chinese-owned variable interest entities.  Restrictions under the People’s Republic of China laws a risk is involved in the ownership.

Alibaba Group Holdings Limited Corporate Legal Structure

BABA corporate structure

Source:  Latest F-1 filing with the SEC

The illustration above presents the corporate legal structure of Alibaba Group with its significant subsidiaries and the variable interest entities. The structure is a combination of variable interest entities (VIE), wholly foreign-owned subsidiaries (WFOS ) and 100 percent owned intermediate holding companies, which use equity interests and contractual obligations to operate within China.

Alibaba’s Contractual Arrangements With Investors 

The People’s  Republic of China has a different structure when it comes to ownership of companies operating in China and listed in the United States. Foreign investment is restricted or prohibited in the PRC through wholly-foreign owned enterprises, majority-owned entities, and variable interest entities. The variable interest entities of the companies are owned by Jack Ma and Simon Xie with 80 and 20 percent ownership, respectively. Further, Zhejiang Taobao Network Co., Ltd. represents 90 and 10 percent ownership of Jack Ma and Simon Xie, respectively. 

The company has entered into contractual agreements which will enable them to exercise effective control over the variable interest entities and realize substantially all of the economic risks and benefits arising from the variable interest entities, a statement taken from the F-1 filings filed with SEC. In other words, it indicates that Jack Ma and Simon Xie holds a very significant share of Alibaba Group Holdings Limited and all other properties that the company is operating in PRC.

Ownership Structure and Contractual Arrangements

BABA Ownership structure

Source: Latest F-1 Filings with the SEC

The illustration above presents the ownership structure and contractual arrangements. The wholly foreign-owned subsidiaries and the variable interest entities profits go to Alibaba Group Holdings Limited, a Cayman Island ownership. The company is using the term “variable interest entities” for its Chinese assets.

The investors from Alibaba IPO has no direct ownership in the Chinese-based companies, however, they can claim to the profits. This is due to the PRC restrictions on foreign entities in having ownership of the Chinese assets. In other words, investors in the US IPO is buying shares in Cayman Islands entity the Alibaba Group Holdings Company Limited and not shares of Alibaba China. This applies to all foreign investors of Alibaba Group including Yahoo! and SoftBank. Moreover, the laws of PRC applies to all companies incorporated in China and listed under the United States, like BIDU and other Chinese companies.

Other significant information

There are significant risks that Alibaba had stated in their F-1 Filings. They indicate that this kind of structure might be illegal in  Chinese law since it ignores the prohibitions on foreign investments.

Moreover, the following statement  from the company’s F-1 Filings with the SEC may be significant to the holders of the American Depositary Shares (ADSs), quoted,

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under Cayman Islands law, we conduct substantially all of our operations in China and most of our directors and all of our executive officers reside outside the United States.

MAIN ACTIVITY

How Does the Company Make Money?

Alibaba Group Holding Limited is doing business by providing online and mobile commerce to small businesses in China and other parts of the globe. Moreover, the company provides retail and wholesale marketplaces through its subsidiaries and make it available through personal computers and mobile devices. What makes Alibaba Group Holdings Limited different with other giant companies in other parts of the globe is that BABA has a concern with their customers and every policy that they make, they make sure that the customers come first and everyone is benefited, according to Jack Ma.

Products

The major business activities and products of Alibaba Group Holdings Limited were E-commerce, online auction hosting, online money transfers, and mobile commerce.

Market

Alibaba Group Holdings Limited is doing its business operations online where they can reach customers around the world with its high internet resources.

Who is running the Business?

Person-in-charge of the Company

JACK YUN MA, Lead founder, Executive Chairman, and Chief Executive Officer

BABA Jack MA

Jack Yun Ma is the head founder and the Executive Chairman since May 2013. Ma is the Chairman and Chief Executive Officer from 1999 to May 2013.

Jack Ma was born on September 10, 1964, in Hangzhou, Zhejiang Province, China. His real Chinese name, Ma Yun was difficult to pronounce and his foreign friends named him Jack.

Ma the head founder of Alibaba Group, called the Chinese business magnate and philanthropist. Also known as the richest man in China as of November 2014, and the 18th richest person in the world with its estimated net worth of $24.1 billion according to Wikipedia.  

Education:

  • In 1988, he graduated in Hangzhou Teacher’s Institute with a bachelor’s degree in English.
  • In the late 1980s, he started his career as lecturer/teacher in English and International Trade at the Hangzhou Dianzi University
  • Earned his MBA from Cheung Kong Graduate School of Business when he was already establishing Alibaba in early 2000.
  • Jack Ma also earned a Doctoral Degree with honors in addition to his MBA at Cheung Kong University.

What did the person worked on in the past and leading up to the present position?

Present Serve as Board member of SoftBank Corp., a major shareholder of Alibaba Group Holdings Limited and a Japanese corporation listed on Tokyo Stock Exchange.
Director of Huayi Brothers Media Corporation, an entertainment group in China listed on The Shenzhen Stock Exchange.
Chairman of The Nature Conservancy’s China board of directors.
2013 to Present Director of UCWeb Inc.
September 2013 Director of the Breakthrough Prize in Life Sciences Foundation
May 2013 Jack Ma stepped down as Chief Executive Officer.
2010 to Present Director of The Nature Conservancy
2007 to Present Director of SoftBank Group Corporation.
1999 Jack Ma founded Alibaba Group Holdings Limited
1999 to May 2013 Chairman, Chief Executive Officer and President of Alibaba Group Holdings Limited
Co-Founder of Yunfeng Capital and Yunfeng Fund II LP
1999 to Present Chief Executive Officer of Alibaba Taobao.com
Chief Executive Officer of Alibaba.com He was responsible for the overall strategy of Alibaba.com and Alibaba Group.
1998 to 1999 Ma headed an information technology company established by the China International Electronic Commerce Center (CIECC).
President of CIECC and became keen with the e-commerce needs of small and medium-sized businesses.
Early 1999 Ma left MOFTEC and launched Alibaba.
Ma began a career as an English teacher.
Chairman of Zhejiang Alibaba Finance Credit Network Technology Co., Ltd., Alipay (China) Information Technology Co. Ltd., Alibaba (China) Software Co. Ltd., Alipay Software (Shanghai) Co. Shangcheng (Shanghai) Commercial Factoring Co. Zhejiang Alibaba Cloud Computing, Hangzhou Alibaba Online Goods Trading Co., Chongqing Alibaba Small Loan Co., Beijing Yahoo Network Information Technology Co. Ltd., Inter China Network Software (Beijing) Co, and many other companies which he served as Chairman.
1995 Jack Ma founded China Pages.
May 1991 Founded Ever Team International Corp.
Mid 1990’s Mr. Ma sees a great business opportunity in technology.

 

Daniel Zhang, Chief Executive Officer

BABA Daniel Yong Zhang

Daniel Zhang is the Chief Executive Officer of Alibaba Group Holding Limited starting May 10, 2015. Mr. Zhang, the former Chief Operating Officer replaced Jonathan Lu who has a strong understanding of business.

Education

  • Bachelor’s Degree in Finance from Shanghai University of Finance and Economics.
  • Member of the Chinese Institute of Certified Public Accountants.

What did the person worked on in the past and leading up to the present position?

Apr 30, 2014, to Sep 7, 2015,

Mar 2014 to Present Non-Executive Director and Member of Strategic Committee of Haier Electronics Group Co.
Jul 2014 to Present Non-Executive Director of Intime Retail (Group) Company Limited
2015 Non-Executive Director, Health Information Technology Limited
2014 to Present Director of Weibo Corporation
Aug 2005 to Aug 27, 2007 Chief Financial Officer and Vice President of Shanda Interactive Entertainment.
Sep 2005 Financial Controller of Shanda Interactive Entertainment Ltd.
Aug 2007 to Jun 2011 Chief Financial Officer of Taobao
Since Jun 2011 President of Tmall.com and General Manager for 3 years.
2002 to 2005 Senior Manager at PricewaterhouseCoopers’ Audit and Business Advisory Division in Shanghai, China.

Maggie Wei Wu, Chief Financial Officer (CFO)

BABA Maggie Wei Wu

Ms. Maggie Wei Wu was the Chief Financial Officer of Alibaba lding Limited since May 2013 to the present. Ms. Wu joined the company in July 2007 as Chief Financial Officer of Alibaba.com and responsible in the establishment of financial systems and organization which lead to the initial public offering in Hong Kong.

Education

Ms. Wu has a Bachelor’s Degree in Accounting from the Capital University of Economics and Business.

What did the person worked on in the past and leading up to the present position?

October 2011 to May 2013 Served a Deputy Chief Officer of Alibaba Group Holdings Limited.
2012 Co-lead the privatization of Alibaba.com
2010 Voted as Best CFO in FinanceAsias’s Annual
Poll for Asia’s Best Managed Companies.
Prior to 2007 Became an audit partner at KPMG in Beijing.
Lead audit partner for IPO and some large capitalization companies listed in international capital markets. She provides audit and advisory services to major multinational corporations operating in China.
Member of the Association of Chartered Certified Accountant (ACCA)
Member of the Chinese Institute of Certified Public Accountants.

NUMBERS ANALYSIS

Equity and Retained Earnings

BABA Historical SHE RE

Facts:

  • The shareholders’ equity growth in the past five years was 1,861 percent.
  • Retained earnings growth in the past five years was 98 percent.
  • While shareholders’ equity dropped by 100.08 percent from 31.5 billion to -24 million CNY in 2013.
  • Equity rose by 122,000 percent from negative RMB 24 million to RMB 29 billion in 2014.
  • Moreover, equity rises again by 396 percent RMB 29 billion to RMB 145 billion in the trailing twelve months.
  • On the other hand, retained earnings in 2013 have dropped by 263 percent and suffered negative results of RMB 20 billion.
  • Retained earnings increased by 106 and 2000 percent in 2014 and 2015, respectively.

Explanation:

  • Acquisition of shares at RMB15.9 billion in 2013 deducted in shareholders equity.
  • And, repurchase and retirement of ordinary shares at RMB 45 billion deducted to shareholders equity. In addition, in 2013, a reduction in retained earnings at RMB 41 billion.
  • Deconsolidation of subsidiaries at 8.6 billion RMB added to equity in 2013.
  • Issuance of ordinary shares at 16.4 billion RMB in 2013 added to shareholders’ equity.
  • Net income of RMB 23.4 billion added to equity in 2014.
  • RMB 24.26 added to retained earnings in 2015.
  • Acquisition of subsidiaries at RMB 14.7 added to equity in 2015.
  • Amortization of compensation cost at RMB 13 billion in 2015 added to equity.
  • Proceeds from the issuance of ordinary shares – IPO at RMB 61.5 billion in 2015 added to shareholders equity.
  • Conversion of convertible preferred shares at RMB 10.3 billion in 2015 added to equity.

Interpretation

The shareholders’ equity and the retained earnings have increased significantly due to the company’s net income and also the proceeds from the issuance of ordinary shares during its IPO.

In addition, the decline from Fiscal 2012 to 2013 was primarily due to the repurchase of ordinary shares from Yahoo! in September 2012. Moreover, the privatization of Alibaba.com partially offset by the issuance of ordinary shares to finance the repurchase.

The Trend Graph

BABA SHE RE Trend

The graph above presents the historical movement of the company’s shareholders’ equity and retained earnings. Consequently, in Fiscal 2013 both the shareholders’ equity and retained earnings were below zero.

Historical Number of Shares Outstanding

BABA # of shares

The table above presents the historical shares outstanding from 2011 to the trailing twelve months. Ordinary shares of 149,220,834 issued on Alibaba’s IPO in September 2014.

VALUATION

BABA valuation model

Facts:

  • The book value growth rate of Alibaba in the past two years was 16 percent.
  • Future book value in 5 years was $25.77
  • While the average return on equity from 2007 to the trailing twelve months was 45.74.
  • In addition, the return on book value in five years was $11.78.
  • The price of the stock of Alibaba in five years was $403.01.
  • On the other hand, the present value of the stock was $174.23.
  • There was a zero percent dividend yield.
  • The risk used was 15 percent.
  • Moreover, the current price of the stock of Alibaba as of November 19, 2015, was $77.69 per share.
  • The intrinsic value of the stock of Alibaba was $104.54 per share.

Statement of Cash Flows

BABA Statement of CF

Facts:

  • The cash from operating activities was 50.70 CNY.
  • While capital expenditure was 7.7 billion CNY.
  • Also, the net cash used for investing activities was -31.7 billion CNY.
  • The net cash provided by financing activities was -10.6 CNY.

Explanation

  • The cash from operating activities was increasing year over year in the past five years at an average rate of 109 percent.
  • On the other hand, capital expenditures are the investment in properties, plant, and equipment.

Interpretation

Alibaba has decent net cash from operating activities and was increasing year over year. Further, the company has a free cash flow higher than the net income for five years. Therefore, it indicates that the company has good free cash flow and Alibaba is a healthy company.

Conclusion

Alibaba Group Holdings Limited (BABA) is a high growth and a healthy company. However, Alibaba has unusual corporate and ownership structures due to the laws and regulations brought about in China. Hence, investors in the US IPO might hesitate to buy shares of Alibaba China. Because they are buying shares in the Cayman Islands entity named Alibaba Group Holdings Company Limited. In addition, investors will not have direct ownership, but rather access to the profits. Furthermore, this may play a significant factor in making a decision on the stock of Alibaba Group Holdings Limited. A Hold position is recommended on the stock of Alibaba due to its ownership structures.

CITATION

http://www.sec.gov/Archives/edgar/data/1577552/000119312514333674/d709111df1a.htm#toc709111_11

https://www.sec.gov/Archives/edgar/data/1577552/000104746915005768/a2225010z20-f.htm

http://www.alibabagroup.com/en/about/overview

http://www.alibabagroup.com/en/about/history

https://www.sec.gov/Archives/edgar/data/1577552/000119312514184994/d709111df1.htm#toc709111_2

http://www.alibabagroup.com/en/about/history

Researched and Written by Criselda

Twitter: criseldarome

Note:

Research Reports can be found under the company tab.