Friday, 18 September 2015

Transcripts...Alibaba talks

Conference season always throws up some interesting thoughts especially given the more volatile market backdrop plus the reality that most companies are about five-sixths of the way through their Q3 numbers which they will report on during October-November.

So interesting times.  Alibaba has been in the news a lot recently...mostly involving that highly excitable Barron's article which basically suggested the stock was still heavily overvalued.

Did this article help form some kind of low?  I did after all (link here) talk about the company post their mid-August disclosures with the share in the lower US$70s as being of great interest...

Helpful then to read this transcript from yesterday's Deutsche technology and related conference. Here are my personal key highlights (with all augmentations such as underlinings mine): 

On Chinese (e-commerce) spending: 
From the micro standpoint, what we – we see that fundamentally, there is still very robust retail e-commerce activity. So, for example, in the areas of our spending like people buying refrigerators, buying white-goods, shopping for furniture, if they want to upgrade into a new apartment, home furnishing, those categories are staying very strong, because these are – this is spending that people have to spend

by large, our belief is that, the Chinese consumer is fundamentally very, very strong

Funding the Chinese consumption switch: 
In the past five or six years, you see both urban and also migrant worker wages have been going up over 10% year-on-year, coupled with a very high savings rate what’s going on is historically there’s been a lot of accumulation of wealth, and in particular cash, in people’s bank account. So when we look at the cash level, net cash level, that is the total deposit in the system, in the banking system, minus household debt, the net cash is $4.4 trillion.

The growth of mobile...and payments: 
the dynamics of mobile versus PC is that, the activity has shifted to mobile in a much faster way than we anticipated

If you don’t have a payment app that you can readily use, it’s very, very difficult to capture the economics from the transaction.

we’re seeing really our ability to create marketplaces that have a lot of commercial value and monetization against that is only in the early inning. And that overtime – there is a lot of economic activity on our platform that we can monetize again

The Barron's article: 
The only thing I want to mention here is that the article was trying to serve information that’s incorrect. For example, they got the total US online advert spend in e-commerce wrong, that’s just the wrong number. So, if you corrected that number, it completely undermines their argument.

Horribly out-of-favour - as are most things Chinese as shown by the year-to-date Shanghai bourse performance which is now down: 

(h/t @Callum_Thomas)

As per my mid-August write-up linked above I personally see an interesting mixture of structural growth, low sentiment and cash flow.  Clearly there are some risks...but there are opportunities too.  I am interested in adding to my position.  

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