Alibaba and Bilibili Both Exceed Topline Growth Expectations
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Alibaba reported March quarterly results and fiscal year 2021 results. Alibaba’s 2021 fiscal year ended at the end of March 2021, which is aligned with the Chinese lunar calendar. For the fiscal year that ended March 2021, Alibaba hit one billion customers globally while the value of merchandise sold reached $1.2 trillion. The March quarter’s topline growth was very strong, though the anti-monopoly fine of RMB 18.228B ($2.782B) caused a quarterly loss. Analysts will exclude the fine since it is a one-time event. However, margins did decline, which will give investors pause.
The company’s revenue forecast for the year is strong. Revenues are expected to exceed RMB 903B from fiscal year 2021’s RMB 717B. Alibaba’s purchase of supermarket chain Sun Art is paying dividends as the company very much helped revenue growth, though it may have also contributed to the margin drag. While cloud computing did well, they did mention losing a significant Chinese customer with a large overseas presence, leading to speculation that that customer was TikTok.
Alibaba reported that Ant Group generated RMB 7.182B ($1.096B) from RMB 4.796B for the quarter ended 12/31/2020. On the conference call, analysts asked about the company’s investment goals for this year. They mentioned doing more in Europe while emphasizing that all investments would be prudent. Over the last five years, Alibaba’s forward P/E has averaged 25. As of yesterday’s close, the forward P/E was 19, which is two standard deviations below that. On every historical fundamental ratio compared to the five-year average, Alibaba is at or near its five-year low. The company bought 1.7mm shares in the last year, spending $371mm. I’ll leave you with this stat: in the fiscal year 2021, the company generated a non-GAAP free cash flow of RMB 172.662B ($26.353B) which is an increase of 32%.
- Revenue increased +64% to RMB 187.395B ($28.602B) versus analyst expectations of RMB 180B
- Core China commerce increased +74% to RMB 123.213B ($18.806B) from RMB 70.905 accounting for 66% of revenue
- Total core commerce increased +72% YoY to RMB 161.365B ($24.629B) which is 86% of revenue
- Cloud computing increased 37% to RMB 16.761B ($2.558B) which is 9% of revenue
- Annual active customers increased by 32mm to 811mm for the year ended Q1 2021 versus 2020
- Mobile monthly average users increased 23mm to 925mm quarter over quarter
- Adjusted EBITDA increased 18% to RMB 29.898B ($4.563B)
- Adjusted EBITDA margin 16% versus 22% in Q1 2020
- Loss from operations was RMB -7.663B (-$1.17B) due to the anti-monopoly fine of RMB 18.228B ($2.782B)
- Without the fine, income from operations would have increased +48% YoY to RMB 10.565B ($1.612B)
- Adjusted net income versus analyst expectations of RMB 29.397
- Adjusted EPS excluding the fine increased +12% to 10.32 versus analyst expectations of 11.57
- With the fine, net loss was RMB 5.479B (-$836mm) and EPS loss of RMB 0.25 ($0.04)
- Fiscal Year Revenue Forecast over RMB 930B versus RMB 717B in the fiscal year 2021
GenZ+ online video gaming, anime, and company that will make you feel old – Bilibili (BILI US) reported Q1 2021 results this morning. My colleague Derek says Bilibili is not a company but a culture. I’m not part of the culture club due to my age. The company provided another very strong revenue growth, though expenses did increase, widening the loss versus Q1 2020. Analysts were expecting a wider loss. The increase in expenses was “primarily due to increased headcount in general and administrative personnel, increased share-based compensation expenses, higher rental expenses and other general and administrative expenses.” Bilibili is growing up as a company!
- Revenues increased +68% to RMB 3.901B ($595mm) versus analyst expectations of RMB 3.781B
- Monthly active users increased +30% to 223.3mm while average daily users +18% to 60.1mm
- Monthly average paying users increased +53% to 20.5mm
- Total Operating Expenses increased 83% to RMB 1.968B ($300mm)
- Adjusted net loss was RMB 665mm ($101mm) versus analyst expectations of RMB -757mm and Q1 2020’s loss of RMB 474mm
- Adjusted EPS loss was RMB -1.87 (-$0.29) versus analyst expectations of RMB -2.08
- Q2 Revenue Forecast between RMB 4.25 and RMB 4.35
Asian equities were a sea of red following the US stock market’s move yesterday. It was a true risk-off day with little place to hide. Mainland Chinese healthcare stocks were up after President Xi commented on traditional Chinese medicine while the materials sector was materially lower as China looks to cool red hot commodity prices. Metals, mining, steel cobalt, and precious metals were all down significantly.
MSCI confirmed after the US close yesterday that they will migrate from Alibaba’s US share class to the Hong Kong listing (9988 HK). FTSE Russell already did the same in their indexes as ETF and index funds benchmarked to them now hold 9988 HK instead of BABA US. We are apt to see NTES and JD migrate to their Hong Kong listings in September since they both relisted in Hong Kong back in June 2020. The US share classes aren’t going away, though volume will migrate to Hong Kong instead of US exchanges.
Yesterday, I mentioned that MSCI’s Semi-Annual Index Review, which requires index and ETF managers to trade at the close, would occur on May 31st. Monday, May 31st is Memorial Day so passive managers will trade at the close on Thursday, May 27th. My bad.
The South China Morning Post noted that JD Logistics will list in Hong Kong with a value of $35B.
A Mainland media source reported that Tencent made $500mm in April from its two largest games: Honor of Kings and PUBG Mobile.
The Hang Seng closed on the day’s low falling -1.81% as volume increased +1.64%, which is just above the 1-year average. The 200 Chinese stocks listed in Hong Kong within the MSCI China All Shares Index were down -1.08%, led by materials -4.56%, tech -3.51%, communication -3.14%, energy -2.41%, discretionary -2.22%, and healthcare -2.05%. Hong Kong’s most heavily traded by value were Tencent, which fell -3.09%, Meituan, which fell -1.41%, Mengniu Dairy, which rose +2.86%, Alibaba Hong Kong, which fell -3.18%, Ping An, which fell -2.1%, Xiaomi, which fell -2.87%, Evergrande New Energy Vehicles, which fell -7.53%, HK Exchanges, which fell -1.57%, AIA, which fell -1.54%, and Zijin Mining, which fell -7.19%. Southbound Connect volumes were light as Mainland investors bought $552mm of Hong Kong stocks as Southbound trading accounted for 8.6% of Hong Kong turnover. Tencent, Xiaomi, and Meituan saw net buying again.
Shanghai, Shenzhen, and STAR Board were -0.96%, -0.81%, and +0.36% respectively on volumes that were up +4.89%, which is 90% of the 1-year average. The 517 Mainland stocks within the MSCI China All Shares Index were off -1.1%, with healthcare up +0.65% and real estate +0.15%, though materials fell -3.89%, energy -3.21%, discretionary -2.51%, industrials -1.32%, tech -1.08%, and financials -0.76%. Northbound Stock Connect volumes were moderate as foreign investors sold -$873mm of Mainland stocks as Northbound trading accounted for 5.9% of Mainland turnover. CNY was off versus the US $ to 6.46 while bonds were off a touch along with copper, which fell -0.46%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.46 versus 6.44 yesterday
- CNY/EUR 7.79 versus 7.81 yesterday
- Yield on 10-Year Government Bond 3.14% versus 3.13% yesterday
- Yield on 10-Year China Development Bank Bond 3.54% versus 3.54% yesterday
- Copper Price -0.46% overnight