Alibaba.com lower in HK on slowdown fears despite strong Q1 results
Alibaba.com Ltd, which runs China's leading e-commerce portal, turned lower at late morning as dealers said its earnings outlook this year would be clouded by the global economic slowdown.
At 12:02 pm, the stock was trading down 0.32 hkd or 1.95 pct at 15.10, off a high of 16.16 hkd. The Hang Seng index was down 383.16 points or 1.46 pct at 25,878.97.
"Despite its strong first quarter results, it's hard to believe that its revenue and earnings growth will not be hurt by the global economic slowdown," said Francis Cheung, head of telecom research at CLSA.
"My sense is Alibaba.com will feel the adverse impact of a global economic slowdown in the second half of this year," he said.
Alibaba.com reported yesterday that its first quarter to March net profit was 301 mln yuan, up 112 pct from 142 mln in the same period of last year, due mainly to an increase in the number of paying users and higher spending per user.
The company is highly dependent on its international operations, which last year contributed 71.6 pct of its 1.55 bln yuan revenue. China business accounted for the rest.
Cheung noted that Alibaba.com's main revenue source is the annual fees it collects upfront from users.
This implies that much of the revenue that it reported in the first quarter was business that it actually generated last year, he said.
"Compared to the fourth quarter last year, subscriber growth in the first quarter actually slowed down so its performance wasn't as good as it seems," he said.
Alibaba.com reported that at the end of March, it had 327,118 paying users, up 35.6 pct from a year earlier.
Registered users of its international marketplace numbered 4.89 mln at the end of March, up 42 pct, while registered users of its China marketplace stood at 24.82 mln, up 36 pct.
Cheung said Alibaba.com's current valuation at about 37 times this year's estimated earnings is expensive relative to its mainland peers and this could be a major issue for investors.
"With its expensive valuation, investors are better off buying Tencent, Sohu and other mainland internet firms," he said. |
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