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

The biggest IPO in history is just around the corner (e.g. November 2020).  Expectations on how high Ant Group can go up on its big day are all over the place.  Most estimates call for a US$200bn to US$300bn market value and this morning, Ant raised its target valuation to US$280bn (previous estimate: US$250bn) due to strong demand.  I will argue it should be valued at least US$350bn. 

Given the enormous scale and complexity of Ant's different business lines, I'll be sharing my thoughts in two deep-dive presentations.  In Part 1, I discussed why Ant's tech services are the more lucrative and growthy drivers, and how important this segment is to Ant's profitability.  If you missed Part 1, you can see the slides and video replay HERE.

In Part 2, I will look at Ant's payment business, i.e. its super app, Alipay, and analyze the advantages/disadvantages against Wechat Pay (owned by Tencent).  Moreover, I will talk about whether other payment platforms (Unionpay, JD Pay, Baidu Wallet, Bytedance etc) pose as formidable competitors.  Ant's payment business is almost universally regarded as its weakest link.  Can the payments space still grow as it reaches saturation levels?  

Next, I will argue why lower reliance on Alibaba is a positive and show an interesting margin boost to Ant given changes in its relationship with BABA.  Then, I will discuss Antchain and Ant's bet on the future of technology.  I will also debate whether the recent introduction of the digital RMB, promoted by the government, is a friend or foe to Ant.

Lastly, I will go through some financial modeling and show what a US$350 billion valuation implies.  Given its unique business model, what is the true comp set for Ant?  Furthermore, SOTP analysis and price multiples may not be that appropriate for Ant.  


Part 2 Presentation Outline (~80 slides)

  • Payments not the end game
  • Digital revolution
  • QR codes
  • Digital wallet
  • Payment penetration & mobile payment trends
  • Alipay as trust agent
  • Ways to keep money circulating in Alipay
  • New rule on deposit interest
  • Role of government policies
  • Fending off Wechat Pay
  • Red packet war
  • Who is bigger? Alipay or Wechat Pay
  • Unionpay QuickPass
  • Other payment competition
  • Key differences with Alibaba
  • Margin boost from BABA arrangement
  • BASIC digitalization is the future
  • BAAS
  • AntChain Marketing Pitch
  • Digital RMB - Friend or Foe
  • Digital RMB trials
  • International markets
  • Important investments
  • Shareholder structure, board shakeup & lock-ups
  • Implied Q3 guidance
  • Hedgeye Algo on Alipay
  • Gross margin efficiency
  • Normalized EBITDA margins
  • Monetization rates
  • FCF
  • Valuation and sensitivity analysis


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

  • Date & Time:  Today at 2pm ET

Clients only.  Please ping  for access.


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ANT GROUP | US$350 BILLION VALUATION (PART 2 PRE-IPO PRESENTATION) - TODAY AT 2PM ET - 1

ANT GROUP | US$350 BILLION VALUATION (PART 2 PRE-IPO PRESENTATION) - TODAY AT 2PM ET - 2

ANT GROUP | US$350 BILLION VALUATION (PART 2 PRE-IPO PRESENTATION) - TODAY AT 2PM ET - 3

Felix Wang, CFA

Managing Director