13. May 2021 | 10:30 CET
Alibaba, Tencent, Baidu, The Place Holdings: These are the Chinese Doublers!
After weeks of correction in Asian Internet stocks, there are now signs of a revival. On the one hand, the relative valuation to the well-known NASDAQ darlings has decreased significantly. On the other hand, the Chinese benchmark index has already undergone a 20% correction in 2021. Meanwhile, the government has raised its growth forecast to +8.4% in 2021. If we think in terms of post-pandemic categories, when China's major consumer countries pick up steam, Chinese equities should be able to bounce back very quickly.
time to read: 4 minutes by André Will-Laudien
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Alibaba Group - How will the Q4 numbers be?
Alibaba Group Holding Ltd. will release its Q4 results for fiscal 2020/21 today. Earnings per share are estimated at USD 1.91 per ADR, which would be a 47% increase from the year-ago quarter. The consensus estimate for revenue is USD 27.9 billion, also showing a growth of 18%. So far, Alibaba has always managed to beat estimates. We are therefore very excited.
Alibaba is the largest commercial B2B platform whose growth is essentially due to technological innovations in the e-commerce business. Supporting roles in the past quarter were played by new AI technologies and the implementation of portals such as Taobao and Tmall. Big Data provides valuable customer usage data and enables Alibaba to present a perfect customer experience on its sites.
Besides the e-commerce segment, the Company's robust cloud segment is expected to continue its momentum in Q4. Alibaba stock has tested the EUR 180 level several times now. If this support can be held, we should soon see a bounce towards EUR 225.
Tencent Holdings - Online penalties
The share prices of Chinese technology giants are constantly spinning when state competition regulators intervene in their businesses. Recently, it caught two rapidly growing online education platforms in which Alibaba and Tencent have equal stakes. These are the tutoring platforms Yuanfudao (Tencent) and Zuoyebang (Alibaba).
The reason for the government's complaint was falsifications in the teaching staff's qualifications and irregularities in the user ratings, and there were also cases of misleading advertising. Both companies have already accepted the penalties; in recent weeks, the Chinese e-learning providers GSX Techedu and TAL Education had already been equally penalized.
The fines are bearable, but they underline that the Internet sector in China is regulated much more harshly than in the past, and internationalization will probably not occur. Overall, we see a deterioration in the environment for emerging technology groups in China. For this reason, further IPOs are not to be expected at present. The government wants to ensure strong public oversight of the new business models.
Earlier this year, Yuanfudao was looking for USD 1 billion in fresh capital for a possible IPO in 2022, but parent Tencent has for now shelved the IPO plans; this is probably another reason for the poor performance of Tencent stock since mid-February. Unfortunately, we do not see any improvement in sentiment here in the short term.
Baidu - Data collection has come to an end
Another regulatory blow hits the Company Baidu. In this case, it is about the immense amounts of data collected by the Internet giant from its users. This practice is also a thorn in the side of public oversight; in Europe, such an approach would be challenging to implement due to extensive data protection regulations.
The Internet authority in China is now putting a stop to the activities of the companies there. According to the Cyberspace Administration of China, a total of 33 software applications, including map navigation services from Baidu and Tencent, violate existing regulations. In particular, this involves the collection of user data that is explicitly not required for the services. The operators now have to adapt their apps within ten working days; otherwise, they will also be warned. Technically, however, it should not be a problem to modify the apps quickly.
The short-term pressure on the Chinese Internet giants will probably continue, but the correction phase for the last-mentioned companies is a good entry opportunity for long-term investors.
The Place Holdings Ltd. - The Chinese real estate developer steps on the gas
Another Chinese company is The Place Holdings Ltd, a real estate conglomerate with a listing in Singapore. The management holding Company currently operates as an asset manager, real estate developer and investor in the biomedical technology sector. The Company's history also includes some tourism businesses and additions to the media industry. The Company's current focus is on the ever-expanding Chinese middle class, who are eager to compare themselves to Western standards in terms of lifestyle and quality.
The Place Holdings covers all steps for major real estate investments and thinks about all processes from the perspective of subsequent acquirers. Here, too, there is a high degree of digitalization and the need for precise data analysis, such as how the wishes of individual buyer groups can be presented in a meaningful offer. The goal is to go to market with a combined retail and rental concept. The overall picture naturally also includes entertainment and shopping districts as well as cultural venues.
One particular site of the Group is currently undergoing a revaluation, this being Mount Yuntai Tourism Township. The site is located in a catchment area of over 40 million people, who in turn are looking for housing and living space. The size of the site is an impressive 270,500 square meters, and in March, it was rezoned from commercial to residential, increasing its expected useful life from 30 to 70 years. As a result of the revaluation, the site has experienced a substantial increase in value of 329% from the previous RMB 112 million to the current RMB 481 million.
The revaluation of Mount Yuntai also significantly increases the intrinsic value of The Place share. In addition to Singapore, the Company is also listed in Frankfurt. The share price currently ranges between EUR 0.07 and EUR 0.12. Those who want to participate in the enormous growth in China are well-advised to take a limited entry.