Tuesday, April 11, 2017

China Telco Data and Market Update - Part 3

China telco subscription data for February, other China market news updates and operator results for 2016 - Part 3

Alibaba maintains explosive momentum with a 53% revenue growth

Alibaba results for the 5 years 2012 to 16 ended March 31st 
(RMB millions):


Latest financial Q3 and YTD 2017 results

On January 24th Alibaba stock was up 3% following Q3 FY2017 results that beat market expectations on both revenue and earnings. Specifically, Alibaba reported:

1.  Revenue up 54% to RMB 53.25 billion ($7.67 billion), ahead of analyst calls by about $375 million (5%). CFO Maggie Wu said that with three quarters already ahead of expectations Alibaba was raising its growth-rate forecast for the full year from 48% to 53%, versus 33% growth for FY 2015/16.

2.  Net earnings of RMB 17.12 billion ($2.57 billion) and adjusted EPS of $1.30, 17 `cents, or 15 % more than the markets were expecting; free cash flow during the quarter was RMB 31 billion ($4.9 billion).

3.  Core e-commerce revenue for Q3 generated by its Taobao and Tmall business systems was RMB 46.58 billion ($6.71 billion), up 45% YoY. Alibaba claims it now has over 493 million users, of which 443 million are classified as active buyers, a significant proportion of China's estimated 731 million Internet users, of whom 95% do their business via mobile phones.

4.  Although still quite a small percentage of its total business Alibaba's cloud computing revenue grew 115% from Q3 2016 to RMB 1.76 billion ($254 million) and was up nearly 50% sequentially. Apart from the encouraging growth rate the cloud business loss in Q3 was $49 million, a significant improvement on its Q2 loss of $66 million, suggesting it could become profitable within the next three quarters. The cloud computing unit added 114,000 paying customers during the quarter to a total of 755,000 customers. At the same time Alibaba launched data centres internationally, following its Chinese customers to new markets as well as acquiring new customers outside China.

5.  Mobile MAUs were up 43 million to a total of 493 million.

6.  Revenue per annual active buyer continued to increase reaching $35 in the December quarter; on the mobile front, revenue per mobile user, which had also been increasing for several quarters, reached $24 in the quarter.

7.  Digital media and entertainment business rose 273% to RMB 4.1 billion ($585 million) as Alibaba continued to integrate its Youku Toudou multi-screen entertainment and media company and other investments in film, music and sports.

8.  Other activities accounted for RMB 845 million ($122 million), up 61%.

Other Alibaba strategic developments

In its January 24th releases Alibaba noted that Koubei , a 12 years old Alibaba affiliate focused on enabling local commerce, had closed a $1.1 billion financing round in January. A major part of Alibaba's e-commerce strategy is now being devoted to its so called 'online-to-offline' initiative, or O2O,which attempts to blur the line between physical and electronic retail.

On January 9th Alibaba announced that, together with the founder of the target company, Shen Guo Jun, it was leading an offer of $2.6. billion to delist from the Hong Kong stock exchange and privatise the Intime Retail Group, a company registered in the Cayman Islands that operates 29 department stores and 17 shopping malls across urban China, mainly in Zhejiang province. Alibaba already owned 28%, acquired in 2014 for $692 million In the official announcement Alibaba CEO Daniel Zhang commented:

-    "China’s total retail sector is a US$4.5 trillion economy and is growing at 10.7% a year. Alibaba is working with offline retailers to transform conventional approach, create new consumer shopping experience and use actions to embrace future opportunities under the new retail model".

-    "We don’t divide the world into real or virtual economies, only the old and the new. Those who cling on to the old ways of retailing will be disrupted, and brick and mortar businesses will be able to create value for consumers if they are integrated with the power of mobile reach, real-time consumer insights, and technology capability to improve operating efficiency".

On February 21st it was announced that Alibaba had agreed for its delivery affiliate, Cainiao Smart Logistics Network, to work with the 4,700-store Shanghai Bailian Group, one of China's largest supermarket and department store chains, to employ its various e-commerce technologies to improve the traditional physically-based retail sector in areas such as customer relations, payment and logistics. This is similar to its tie-ups with other players such as electronics chain Suning Commerce Group and the Sanjiang Shopping Club (in November 2016 Alibaba invested around $300 million to acquire 30% of Sanjiang SC).


Alibaba is now beginning also to accelerate its international expansion. In April 2016 the company invested $1 billion to acquire a majority share of Lazada.com a privately owned German e-commerce company with sites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. In early February 2017 sources claimed that Alibaba and its affiliate company ANT Financial were leading an additional investment of up to $200 million in Indian e-commerce and digital payment platform Paytm (a company in which they had already invested $680 million and owned 42%). The deal that would essentially give them a majority stake in the company. Paytm competes in the emerging Indian e-commerce market with companies such as Amazon India, Flipkart and Snapdeal.

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