Alibaba runs or participates in a large number of smaller businesses that we have to take into account for our SOTP valuation. Let’s analyze them one by one. The first and most controversial one is Ant Financial, a company that once was under Alibaba’s direct control, but due to Chinese regulation, Alibaba had to divest its stake in the company. There is now only a profit-sharing agreement under which Alibaba receives royalty streams and a service fee paid at least annually, amounting to the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial Services, subject to certain adjustments. But the important part is another:
In addition, in the event of a qualified IPO of Ant Financial Services or Alipay, if our total ownership of equity interests in Ant Financial Services, if any, has not reached 33%, we would be entitled, at our election, to receive a one-time payment equal to 37.5% of the equity value, immediately prior to a qualified IPO of Ant Financial Services, as a whole and not just of its subsidiary Alipay.
Assuming that Alibaba will choose the most convenient option, the entitlement to receive 37.5% of Ant Financial's equity value would translate into a value of $22.5 billion, based on its most recent funding round that valued the company at $60 billion.
By combining all these participations and rights, we have a total value of $36,704 million for the category “other investments” to use in our SOTP valuation.
- Alibaba owns a 20% stake in Suning Commerce Group worth $2.90 billion based on Suning’s market cap of roughly RMB 89 billion.
- Per the last 20-F, Alibaba owns a 38% fully diluted stake in Koubei, which I value at $3.04 based on a total value of $8 billion for the business.
- Per the last 20-F, BABA owns a 47% equity interest in Cainiao Network Technology, which I value at $3.619 million based on a $7.7 billionvaluation for the business.
- A 49.5% equity stake in Alibaba Pictures, worth $2.42B, based on Alibaba Pictures’ market cap of RMB 33.06 billion.
- A 35% stake in Sanjiang Shopping, worth $490 million, based on Sanjiang’s market cap.
- A 13% stake in Beijing Shiji Information Technology, worth $452 million, based on Shiji’s market cap.
- A 14% stake in Singapore Post, worth $313 million, based on Singapore Post’s market cap.
- An 11% equity interest in YTO Express Group, worth $835 million, based on YTO Express' market cap.
- A 4% stake in Huayi, worth $135 million, based on Huayi’s market cap.
Alibaba: My Valuation Of The Stock - Alibaba Group Holding Limited (NYSE:BABA) | Seeking Alpha