Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 29 January 2016

Alibaba and the Q4 facts


There is a lot of conjecture about whether China's reported economic growth of +6.9 per cent is real or made up. Some like to argue that growth is nearer 2 or 3 per cent, as indeed is their right.

In that context, a quick look through Chinese e-commerce group Alibaba's latest quarterly results for December 2015. 

Being traded on the New York Stock Exchange (NYSE), the numbers should be somewhat less rubbery, if not exactly water tight.

Alibaba's key operating metric is Gross Merchandise Volume (GMV) which increased by +23 per cent over the year to a quarterly GMV of RMB964 billion (which, by the way, is a staggering US$149 billion).  

Annualise those numbers and the scale of the business is mind-blowing. Let's work with US dollar figures henceforth...

Summary financials 

Skipping along to the summary financials, quarterly revenue was up by +32 per cent year-on-year to US$5.3 billion, while mobile revenue soared by +192 per cent to US$2.9 billion.

Looking instead at the pretty pictures from the quarterly preso, the group had a milestone quarter with the number of annual active buyers blazing up to 407 million. Quarterly free cash flows of a monumental US$3.7 billion were generated.

Active buyers of 407 million were up from 334 million one year ago.

Revenue growth (+32 per cent), GMV (+23 per cent), "EBITDA" and net income all recorded impressive results.

The wrap

Solid numbers. The Chinese economy isn't slowing in the conventional sense - rather it is changing. 

The middle class is growing, and so is consumption. Looking at the growth and profile of buyers, some wealth and Alibaba's reach is evidently flowing outwards to rural areas and villages. 

Alibaba's share price has retraced since the beginning of 2015, as much a recognition that GMV growth could not continue at the same breakneck pace as anything else, and there are some evident and valid concerns about increasing scrutiny into counterfeit sales or "fakes". 

Alibaba has also flagged some potential for slowing sales in the market place, which will translate into a slightly lower share price. 

Overall, though, consumption is clearly growing in China, underscored by these financial results.