Takeaway: Relevant tickers: Ant, BABA, 700.HK, JD, JD Digits, Bytedance

An ant has superhuman strength and can carry up to 100x its own weight.  Believe it or not, this amazing strength is a result of its small size.  By focusing on the needs and solving problems for the small merchants and consumers, Ant Group has grown its user base >200x since its founding as Alipay in 2004.  

Ant‘s super app, Alipay, has become a must-have in people's lives.  Even though it is already a behemoth, Ant is still scooping up meaningful market share in different business lines.  Furthermore, as Ant's largest customer, Alibaba only accounts for 6% of Ant's revenues, which I see as a positive, as Ant can stand on its own, revenue-wise.  And implied Q3 2020 guidance suggests an acceleration in growth.  No wonder there is such pre-IPO frenzy for Ant, as investors are clamoring for a share of the biggest IPO in history.

Roadblocks to Ant's growth include additional regulation and competition.  Government regulation can be highly complex and evolving but Ant has important relationships with the government.  Meanwhile, I will argue that some competition will give Ant headaches while others aren't much of a threat.  

Given the enormous scale and complexity of Ant's different business lines, I'll be sharing my thoughts in two deep-dive presentations: Part 1) digital finance technology; Part 2) Alipay + blockchain/digital RMB + financial modeling

In Part 1, I will discuss why Ant qualifies as a "tech" vs a "finance" company.  While Ant is mostly synonymous with mobile payments i.e Alipay, the fintech giant's focus on tech services is more sexy.  By working as a facilitator, Ant is able to benefit from a recurring fee stream with low risk.  Ant's credit business is its strongest link and its largest revenue contributor.  I will go through Ant's distinct advantages in CreditTech (Huabei, Jiebie, MYbank) in solving problems for SMBs (small and micro enterprises) and why the future is bright in consumer finance, despite looming government regulations.  As for InvestmentTech (Yu'ebao, Yulibao, Ant Fortune), I will hit on the importance of "putting your eggs into 24 baskets".  Opening up to multiple fund relationships is critical to InvestmentTech's success.  As for InsureTech, the premiums continues to recover and Ant is well-positioned with its suite of "insurance" products.  I will discuss some of the recent upgrades and why mutual aid is so appealing.  Lastly, I will go through my thoughts on Tencent's non-payment fintech businesses and if Ant should be worried.  

I will share details on Part 2 in the coming week. 


Part 1 Presentation Outline (~95 slides)

  • Super Ant - lots of little ants
  • Why it's qualified to be a tech company
  • Perplexing user case
  • CreditTech
    • Intro to consumer finance
    • Govt data on loan/ABS market
    • How big is the credit market?
    • Important credit demand indicator rebounded but not yet V-shaped
    • SMB loans
    • Ant loan vs traditional bank loan
    • Credit risk exposure
    • Credit market share
    • Huabei & Jiebei (spend and borrow a little)
    • Sesame (Zhima) Credit
    • MYbank
    • Delinquency rate vs market
    • New consumer finance entity
  • InvestmentTech
    • China vs global fund market
    • Exponential growth in public funds
    • Public funds market share
    • Stock market mania - impact on money market funds
    • Market contraction in online users but Ant resilient
    • Ant Fortune (Caifuhao)
    • Robo-advisor
    • Yu'ebao (users, subscriptions, assets, funds)
    • Proprietary tool to track Yu'ebao funds
    • Yulibao
    • Yu'ebao and Yulibao competition
    • Tianhong potential legal battle
    • Ant as sales agent
  • InsureTech 
    • Insurance Premiums
    • How Ant is different
    • Quanminbao (Universal Lifetime Pension Insurance)
    • Haoyibao (Good Medical Insurance)
    • Mutual Aid & Xianghubao (Mutual Protection)
    • How crowdsourcing works
    • Why ZhongAn Online P&C Insurance is important
  • Competition from Tencent (Excluding Wechat Pay)


Part 1 Conference Call (Digital Finance Technology)

  • Date & Time: Tomorrow at 2pm ET

Part 2 Conference Call (Alipay, blockchain/digital RMB & financial modeling)

  • Date & Time: TBD

More details to come. Please ping  or reply to this email for access.


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ANT GROUP | WHY INVEST IN THE BIGGEST IPO IN HISTORY (PART 1) - CALL TOMORROW AT 2PM ET - 1

ANT GROUP | WHY INVEST IN THE BIGGEST IPO IN HISTORY (PART 1) - CALL TOMORROW AT 2PM ET - 2

ANT GROUP | WHY INVEST IN THE BIGGEST IPO IN HISTORY (PART 1) - CALL TOMORROW AT 2PM ET - 3

Felix Wang, CFA

Managing Director