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<Research>CMS Foresees BABA-W's Entry to Southbound Stock Connect to Bring 10-15% Incremental Liquidity
Recommend 44 Positive 57 Negative 25 |
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CMS released a report that BABA-W (09988.HK) was formally admitted into Southbound Stock Connect yesterday. The broker continued to be optimistic about the company's better competitive position, rebound in growth rate, earnings growth and attractive shareholder returns. It reiterated Overweight on BABA-W and maintained its target price at HKD123. The broker pointed out that Alibaba was formally admitted to the Southbound Stock Connect yesterday after successfully completing its dual primary listing in Hong Kong and the US. The broker estimated that the entry of Alibaba to the Southbound Stock Connect may bring 10-15% incremental liquidity. The broker pointed out that Alibaba’s outlook was boosted by multiple drivers. The first was the company's shift in focus to GMV growth and the slowdown in the growth of live e-commerce platform's GMV, which the broker considered marginally lifted its competitive position. Secondly, the broker also spotted a return of merchants, thanks to Alibaba's consistent leveling of the playing field between merchants and users, as well as the recent merchant friction among peers. Thirdly, monetization rate improved. The broker expected higher advertising and commission revenue to help narrow the gap between GMV and revenue growth rates as advertising and commission rates improved. Fourthly, losses in segments such as Cainiao, local life services and international e-commerce continued to be reduced, and management planned to achieve breakeven within 24 months. Fifthly, Alibaba had the largest share repurchase program totaling US$65 billion (valid through March 2027), with US$26.1 billion unused as of the June quarter, which, together with the cash dividend (expected dividend payout rate of about 12% in FY2025), led to an estimated a current total shareholder return of 7.5% (6.2% repurchase and 1.3% cash dividend). AAStocks Financial News |
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