Business Description:
Diversified tech company
Main business is the marketplace and other online retail businesses, which they categorize as core commerce. Core commerce accounts for 86% of total revenues (18% of retail market share in China). Since they are not a retailer but a marketplace, they can draw higher profit margins compared to other ecommerce companies
Cloud computing accounts for 8% of revenues with 60% growth rate while Cainiao with 4% of revenues and growth of 51%
Catalysts:
Rapid growth of Chinese economy
Worldwide Growth
Risks:
Regulations and Antitrust probes on big tech in China
Fears of delisting of US shares
Pandemic in China
Financial Analysis:
Valuations:
My personal Biases:
Bearish on China in the short-term (coming months)
Did not do well on previous investments in Chinese tech stocks
Very conservative with all the uncertainties surrounding China
Assumptions:
Revenue growth of 20% annually for the next 5 years (Over 40% in the last 5 years)
FCF margin of 15% (less than average for the last 5 years)
Discount rate of 15%
Terminal growth rate of 4%
Margin of safety of 20%
Exit Multiples based on P/FCF Ratio
Sales 20% higher in bull case and 10% lower in bear case
Shares outstanding stays the same
Conclusion
Undervalued even with a margin of safety
