It caught my eye that Charlie Munger (long-time partner to Warren Buffet) just bought BABA. Buffet and Munger had avoided technology for most of their careers before they hit a home run with AAPL. Its unusual to see these old guys buying into tech stocks, so I dug in and did a quick sum-of-the-parts analysis. Here is what I came up with, would love to get any feedback in case I am missing something.
- Core China eCommerce biz has 60% of all eCommerce in China. This is a highly profitable cash cow - approx. $250/share using a 25x P/E.
- Other China retail including leading grocery co Hema and stake in HK-listed Alibaba Health – approx. $20/sh
- Net Cash - approx. $20/share
- Stake in Ant Financial at ½ the valuation prior to canceled IPO - approx. $20/share
- AliCloud – leading cloud company akin to the AWS of China - approx. $20/share
- All others – Eleme (Meituan competitor), Lazada (leading SE Asia eComm co), Cainiao logistics, Alibaba.com wholesale biz, Yoku online video, etc. - $20+/share
- Add all this up and total value/share is approx. $350/sh.
- Stock closed at $225, so ~65% of sum-of-the-parts, or in other words, we have 55% upside.
Alibaba appears to have a collection of growing/compounding businesses, so not only do you get short-term appreciation to sum-of-the-parts, but also good growth of the sum-of-the-parts.
What are your thoughts on Alibaba? Let me know in the comments!