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.
We're very data-dependent and strongly believe in the importance of getting an edge. We use a unique set of big-data quantitative tools (in-house & with 3rd party platforms) to try to map out what's happening real-time.
Felix Wang, CFA