Alibaba, Alpina Holdings, NIO - Buy Asian stocks now?

Alibaba - Analyst estimates exceeded

Alibaba is a major player in China's e-commerce and cloud computing markets, falling from its highest market valuation of USD 835 billion to around USD 230 billion. On February 23, the Company reported revenue of USD 35.9 billion for Q3 FY2023, up 2% YOY, thanks mainly to BABA International Commerce, which posted an 18% YOY increase, and Cainiao, which posted a 27% YOY increase in revenue.

Cloud segment revenue growth was primarily driven by healthy public cloud growth, partially offset by declining hybrid cloud revenue. However, overall growth continues to slow. A significant portion of Alibaba Cloud's revenue comes from non-web industries, particularly financial services, education, and automotive, which accounted for 53% of total revenue. After capital expenditures of USD 850 million, the Company generated free cash flow of USD 11.8 billion, which was used, among other things, to repurchase about 45 million shares.

The group thus beat analysts' estimates on sales by USD 40 million and non-GAAP earnings per share by USD 0.39. Operating income was up about 400%, and net income more than doubled from a year ago. Fundamentally, the stock is cheap. As an investor, however, one should be aware that since the critical statements of its founder Jack Ma towards the Chinese government, obstacles have repeatedly been put in the way of the group. Those aware of the risk can buy at a share price of currently USD 89.70. The price should not fall below the support level of USD 85.04 on a closing price basis.

Alpina Holdings - 3% dividend yield

Alpina Holdings operates in Singapore and provides real estate and construction services to its clients, mainly from the public sector. Its business model is based on three divisions: integrated building services (IBS), mechanical and electrical (M&E) engineering services, and alterations and additions (A&A). As the Company holds the highest licenses in Singapore, it can participate in all tenders issued by public institutions. With its subsidiary Digo Corporation, it has made progress in the renewable energy sector and will install solar cells with a capacity of 70 MWp by 2025.

On February 24, the Company released its unaudited annual results for 2022, reporting total revenue of SGD 49.89 million and a net profit of SGD 2.04 million. The Company declared a total dividend of SGD 0.5424 per share for the fiscal year. Despite the negative impact of increased labour and subcontracting costs on the overall gross margin, Alpina's three business segments remained operationally profitable. The Group generated 8 new contracts that run until the end of 2028 and have a total value of SGD 10.45 million. As of December 31, cash and cash equivalents amounted to SGD 11.66 million.

The Company also secured the "Certified Facilities Management Company" certification. This should make Alpina even more competitive in the future. In the coming years, Singapore's Building and Construction Authority (BCA) expects annual orders of SGD 14 and 18 billion from the public sector. Growth potential is therefore available, and the 3% dividend yield is impressive - especially as the management has confirmed to distribute at least 50% of the Company's profit to shareholders in the coming years. The Alpina Holdings share is currently listed at SGD 0.18 and can also be traded in Frankfurt.

NIO - Disappointing in the short term, better prospects long term

NIO is a Chinese manufacturer of electric vehicles (EVs) and suffered on the stock market after the release of its latest figures. The earnings report showed shrinking profit margins and lower short-term revenue expectations than expected, disappointing many investors. Revenue for the fourth quarter of 2022 came in at USD 2.33 billion, down USD 230 million from expectations but up 62.2% YOY. Total revenue for 2022 was USD 7.14 billion, up 36.3% YOY. Vehicle sales totalled USD 2.14 billion, up 60.2% YOY.

The main criticism is the significantly shrunken vehicle margin, which fell from over 20% to just 6.8%. The reasons cited for this were the switch to new product lines, the reluctance of buyers to wait for the new models, and greater competition. The latest generation models are expected to start shipping in Q2 with higher margins. The fact is that Tesla also had to lower its prices in China recently. William Li, CEO of NIO, expects the margin to be back between 18 to 20% by the end of 2023.

Analysts at Deutsche Bank and Bank of America were surprised by the low margin and adjusted their price targets downward. In the short term, there could be further pressure after the Q1 figures. The last sales figures in February were 12,157 vehicles, which is still an increase of almost 100% YOY. In the long term, the turnaround could start after the Q2 figures. Currently, one should still be cautious because the chart looks battered. The support level at USD 8.38 has been held. Currently, one pays USD 9.57 for a share certificate.

In Asia, the economy is on the rise. Alibaba has positively surprised analysts. Fundamentally, the stock is cheap but carries political risks. NIO has surprised analysts negatively, but the long-term outlook could be good. Here, one should wait for the figures for the 2nd quarter. There are no political problems in Singapore. Alpina Holdings has been operating successfully there for 17 years. The Company pays out 50% of its profits, which currently corresponds to a dividend yield of about 3%.