Author Topic: BABA - Alibaba  (Read 52879 times)

plato1976

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Re: BABA - Alibaba
« Reply #170 on: June 09, 2018, 10:33:49 AM »
The fear about SoftBank is really the constant high debt load; they may delever with s merger and telecom IPO but they are talking about vision fund II so the leverage may go up when that happens. Tech is at a high point in general — obviously the market doesn’t like the idea to use leverage to acquire high risk tech assets at this point


cameronfen

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Re: BABA - Alibaba
« Reply #171 on: June 09, 2018, 12:57:37 PM »
The fear about SoftBank is really the constant high debt load; they may delever with s merger and telecom IPO but they are talking about vision fund II so the leverage may go up when that happens. Tech is at a high point in general — obviously the market doesn’t like the idea to use leverage to acquire high risk tech assets at this point

I don't have the numbers right on me but a telecom like softbank's japan assets can hold 4 or 5 turns of EBITDA.  After subtracting that out leverage is more than manageable.  I think asset managers can hold some leverage especially with SB cost plus management fee of 5% model.  And then you can hold some debt around equity positions, but that is more questionable in my mind but the remaining debt is not too high (or zero). 

ajc

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Re: BABA - Alibaba
« Reply #172 on: June 10, 2018, 12:25:02 PM »

The fear about SoftBank is really the constant high debt load; they may delever with s merger and telecom IPO but they are talking about vision fund II so the leverage may go up when that happens. Tech is at a high point in general — obviously the market doesn’t like the idea to use leverage to acquire high risk tech assets at this point


Not to take up too much of the Alibaba thread here, but in terms of perception I think that's directionally right. The S/TMUS deal looks like being the main anchor or the main catalyst, depending on what happens. After that, I'd say the home telecom IPO then the Didi and Uber events are probably the next biggest deals. In Softbank's favor, they've obviously been trying to get the stock re-rated for some time now (major buybacks when Arora was there & playing up the 'Berkshire of tech' tag in arguing for a stock premium). The first two moves seem to be in the works with exactly that highlighting in mind.

We'll have to agree to disagree on tech valuations generally. I see some expensive stuff, but also some growing cash flows at very reasonable prices. I also think cameronfen's comments about asset managers is accurate. Bloomberg did a short article on that a few weeks back (https://www.bloomberg.com/view/articles/2018-05-08/softbank-is-japan-s-hna-that-s-good). Since then, they did exit Flipkart, which was a concern raised in the article. They'll also get a public 'exit' when those two ride-sharing IPO's happen next year. Anyway... time will tell how well they execute and if other factors go in their favor, but it does look like they're doing what's needed to help close the substantial discount to fair value.