Glendale Park Update March 5th

 

Previously wrote a post on The Botany which is a new launch at "close proximity" to Glendale Park, can read here.

The balloting result is out today. According to Business Times(full article here), nearly half of the total units were sold at an average psf of S$2,070. 

All of the 36 one-bedroom units, and 93 per cent of the 104 two-bedroom units have been sold, according to Sim Lian. “More than 20 per cent of the 175 three-bedroom units, 57 four-bedroom units and 14 five-bedroom units were taken up. As usually the one and two bedders were almost all sold out, which likely also contributed to the higher average psf. 

With the current high mortgage rates coupled with heated discussions on affordability in parliament, I don't think we will see full sold out projects on balloting day anymore. 

Another project that is close to TOP, Dairy Farm Residence right beside Botany also saw a S$1,999 psf new sale transaction in Jan 2023 likely from bounce units that were bought. 

All these new launches are pretty beneficial to Glendale Park. Potential Glendale Park buyers may continue to transact at a higher psf to correlate with the high leasehold launch psf. Why do I say that? Because buyers may want to capitalize on buying resale so that they can rent their unit out at todays crazy rental rates, rather than buying an expensive new launch and wait for 3-4 years later for TOP. Firstly, because more uncertainty, as the price premium relative to resale freehold units are pretty obvious. Secondly, not built yet, not sure if developer is viable within this time period ie more risk.

There is another GLS that is even nearer to Glendale Park that will likely be launching soon, curious to see the reception and psf for that. Mentioned before, all the new launches are leasehold, lesser total units, very far from Hillview MRT, fully maximized GFA yet almost S$500psf more expensive than Glendale Park which is freehold, bigger development, 5mins sheltered walk to Hillview MRT and with the potential for plot ratio optimization in the future(enbloc).

The tenancy for my unit at Glendale Park will also end on 8th July 2023. Curious to see the rental demand then, hopefully we can get another bump up. Latest Glendale transaction still at S$1,580 psf, with no new transaction shown since my previous post.

Thoughts on Alibaba's Current Valuation

 

Please click and read this disclaimer if you wish to continue with the contents below.

To read my previous valuation for their last quarter result can click here

Alibaba's December quarter 2022 result is out, lets revisit the sum of parts again:

Alibaba's market cap as of today is US$230.29 billion

Net cash: 55.007 billion

To be even more conservative this time I use their cash + short term investments minus all their borrowings. Excluding escrow receivables + restricted cash

Share investment equity value: 64.387 billion

"Equity securities and other investments" + "Investment in equity method investees" to be more conservative this time, I include their 33% Ant Group stake in it. This means I value Ant as it is in the balance sheet without any IPO prospects.

Cainiao(63% stake): 22.982 billion

Latest cash injection valuation done by Alibaba and size it to 63% stake, article here. That was in 2020, it should be worth more now due to its growing topline and shrinking ebita losses. If we use the same multiple as their 2020 cash injection valuation of 3.8x topline. Base on the 2.4bil usd topline for this quarter, the valuation is around 22.982 billion for Alibaba's 63% stake. This is despite the fact that Cainiao is growing their topline at 27% year on year.

Alicloud + Dingtalk: 58bil usd

Annualized its revenue this quarter and give it a conservative 5x multiple. 1/3 of what Liliani's article is valuing it at. Almost half of Goldman Sachs' valuation in 2020(article here). 

Alicloud is ebita profitable, close to being operationally profitable. The 5x multiple I feel is warranted because its 9 months topline can still grow at 5% yoy, despite the draconian restrictions on the Chinese economy in 2022 under the zero covid policy, compared to Tencent which is currently trading more than 5x topline with almost no revenue growth yoy. 

Alicloud has the largest market share in China at 36% and ranked third in the world. Cloud works on scale, so the larger market share you have, the higher gradual margin increment you will inherit. 

Do note that in terms of Iaas global market share, Alicloud is bigger than Google Cloud and Google Cloud is estimated to be conservatively valued at 200bil usd. I feel 58bil usd for Alicloud is reasonable.

International Commerce(Lazada, Aliexpress, Trendyol): 22.576 usd

From the latest financing round in 2021, during the peak of covid, Trendyol is already valued at 16.5bil usd, article here. Annualize this segment's revenue for this quarter and give it a conservative 2x multiple.

Reason I give a 2x multiple is because Alibaba already has the experience paving a path to profitability for their domestic ecommerce. So despite the competition and difficulty in adapting to different cultures and languages, the potential to profitability is still there.

I feel that 22.576 billion is conservative because Trendyol latest cash raise valued it at 16.5bil already and I don't think Aliexpress and especially Lazada are only worth 6billion usd.

Ele.me, Amap, Fliggy, Digital media, Innovation: 12.513 bil usd

These businesses have unsubstantial revenue and unlikely to turn profitable anytime soon. I group their revenues together(Local consumer service + Innovation + Digital entertainment) for this quarter, annualize it and give it a 1x multiple. 

Total sum of parts ex China core commerce: US$235.465 billion

This means Alibaba's most profitable segment, its China core commerce which helped the company churn out close to 12bil usd of fcf for this quarter alone is not only free, but valued at negative 5 billion usd in terms of its total sum of parts.

Even though I try to be conservative as much as I can, there might still be errors due to over valuation from previous cash raise or unknown headwinds for their businesses going forward. But assuming their 12bil free cash flow per quarter continues every quarter at a realistic range, I feel their net cash will keep increasing and hence the potential error will be corrected over time. 

Alibaba repurchased 45.4 million ADSs for approximately US$3.3 billion under their share repurchase program. This amount is close to doubled from last quarter. 

From mid 2021 onwards, Baba's total issued shares have been decreasing every quarter even after share based compensation. This gives me an impression that the management knows the company is cheap and hence wants to actively close the gap through share buy back. 

To give you a gist of how low Chinese tech companies are valued now. Nvidia churns out 4-5bil usd of fcf in a year, Alibaba churns out 12bil usd fcf in a quarter(3 months) yet Nvidia's market cap is 2.5x that of Alibaba. The reason is likely due to geo politics, domestic governance risk and macro outlook, hence it depends on you whether you want to consider these factors into your investing strategy. Own view.

Glendale Park Update February 2023

 

The recent launch of a 99 years leasehold condo called The Botany is situated near Glendale Park. It is developed by Sim Lian. It emerged at the top of seven bids at the close of the government land sale (GLS) tender and won the site for $347 million or $980 psf per plot ratio (psf ppr). The 386-unit The Botany at Dairy Farm, is expected to preview on Feb 18, with sales to start on Mar 4. 

There is even an article on Business Times:

What's interesting is that the price starts at S$998,000 which is likely the smallest one room unit. From the article it says their one room unit size range from 507sq ft to 710sq ft. That means for S$998,000 you are buying a unit there at S$1,972 psf. The almost S$1000 psf premium to its cost is likely due to high construction cost and advertising.

Lets look at the map to get a clearer picture:

The recent Glendale transaction this year showed a psf of S$1,580. It is a freehold low plot ratio big development with 448 units and a much bigger land than The Botany. Also its a 5 mins sheltered walk to Hillview MRT.  

The Botany is a 386 units 99 years leasehold new launch condo that is likely fully maximized in terms of its GFA. It is situated quite a distance from Hillview Mrt(don't think its walkable). Yet its priced at S$1,972 psf. 

This is what I mean by price disconnect between the leasehold new launches and the freehold condos. With more leasehold new launches coming up around the Hillview area, will it further bring up the value of the older freehold condos nearby? We have to wait and see.