PHUKET: It’s not been an easy market for many individual stocks over the last few years. Take the case of Chinese internet and e-commerce giant Alibaba Group Holding Ltd (NYSE: BABA) – a stock I have been watching closely since its debut, when a client wanted to buy some shares.
Many western investors do not appreciate just how big of a global internet and e-commerce bellwether Alibaba truly is. For starters, Alibaba.com is the world’s largest online business-to-business (B2B) trading platform for small businesses.
There’s also consumer-to-consumer (C2C) portal Taobao, which is similar to ebay.com, while Alipay is China’s version of Paypal. Other business interests range from numerous e-commerce related websites, cloud computing, instant messaging and online music services to the newspaper South China Morning Post.
In September 2014, Alibaba had the biggest IPO in history (US$25 billion) as shares were priced at US$68, but opened at US$92.70. Shares then surged to an all-time high of US$115 in subsequent months, only to be crushed by the market to as low as US$59. Right now, Alibaba’s technical chart shows a solid bottoming formation in the form of a triple bottom, roughly from last summer until this spring, followed by a consolidation, until more recently when shares broke out about 19 per cent to the US$97 level.
On August 11, Alibaba easily beat earnings and revenue expectations for its fiscal first quarter, which bodes well for the rest of the year’s performance. Some key financial or business metrics from the quarter include:
Sales grew 59 per cent to US$4.84 billion, the fastest growth since the 2014 IPO, thanks to revenue from acquisitions earlier this year; while the core China e-commerce business grew 47 per cent, also a post-IPO high.
Mobile monthly active users surged 39 per cent to 427 million and mobile revenue increased 119 per cent year-on-year – accounting for 75 per cent of Alibaba’s total China retail revenue compared to 51 per cent in the same quarter a year earlier.
Annual active buyers on Alibaba websites rose 18 per cent to US$434 million for a net addition of US$11mn from the prior quarter. Alibaba bought back US$2bn worth of shares.
On the other hand, Alibaba continues to face its share of unique challenges, that include currency headwinds hitting the top-and bottom-lines as China depreciates the Yuan and the US dollar remains strong. Counterfeit goods appearing on Alibaba sites also remains a serious problem, while how the company calculates some key business metrics along with some murkiness in its financials remain concerns for US regulators and investors alike (BABA is, after all, a Chinese company).
Like Google, Alibaba’s core business has allowed the company to splurge on more wildcard investments – many of which continue to lose money and may or may not ever bear fruit. The promising cloud computing business did grow 156 per cent last quarter, but it’s still relatively small (US$187 million in revenues) compared to Amazon Web Services and is still losing money (albeit, the business is closer than ever to break-even).
Moving forward, Alibaba’s technical chart could see further consolidation at present levels, while a pullback would be perfectly normal. Shares could still end up retesting the previous resistance level, which will then become a new support level. However, we will only know for sure by watching the share price action over the coming weeks.
And even if you don’t want to invest in individual stocks like Alibaba, watching the performance of growth stocks like BABA (that are also bellwethers) is important at this stage of the market, because its growth stocks that always provide the main source of fuel for bull markets. Likewise, many skeptics continue to believe this market cannot move higher – leaving it up to growth stocks like Alibaba to prove them either right or wrong.
Does a growth stock like Alibaba fit into your portfolio?
Don Freeman, BSME, is president of Freeman Capital Management, a Registered Investment Adviser with the US Securities Exchange Commission (SEC), based in Phuket. He has over 15 years experience working with expatriates, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. He can be reached at 089-970 5795 or email: email@example.com
— Don Freeman
Thai Airways under pressure to deliver workable business plan
Thai Airways is coming under more pressure, after being given 30 days to deliver its new rehabilitation and business plans.
Thaworn Senniam, the Deputy Transport Minister, gave the instruction yesterday while meeting with the executive of the national carrier for an update on its financial status.
He says the business plan must provide clear information on how the fortunes of the airline can be turned around, with a focus on making it profitable once more, while improving customer satisfaction.
The order comes after Thai Airways President, Sumeth Damrongchaitham, denied last week that the airline was experiencing a liquidity crunch, claiming it had sufficient cash flow “for present and future operations”.
Minister Thaworn has previously said he does not believe Thai Airways’ existing rehabilitation plan will help it succeed in a turnaround. He has also ordered a monthly progress report on the carrier’s plans to buy new aircraft.
In September, the directors of Thai Airways asked the Executive Board to review a plan to order 38 additional aircraft, worth a total of 156 billion baht.
According to their second-quarter 2019 filing to the Stock Exchange of Thailand, Thai Airways and its subsidiaries reported a net loss of 6.878 billion baht, compared to a loss of 3.086 billion baht over the same period last year.
SOURCE: The Nation
World Economic Forum says lack of critical thinking in Thailand affecting competitiveness
Thailand’s competitiveness ranking has dropped two places in the Global Competitiveness Index just released by the World Economic Forum (WEC) in Switzerland. The country has dropped from 38 to 40 out of a total of 141 global economies ranked.
The WEC claims that a lack of critical thinking in teaching in Thailand, along with its failure to dominate in any markets, plus its unsafe drinking water, is affecting the country’s competitiveness.
The Nation reports that Singapore has come top in the ranking, overtaking the U.S. and Vietnam has shot up 10 places to 67.
The deputy secretary general to the PM for political affairs, Kobsak Pootrakool, responded to the findings, saying that as other countries improved their rankings, Thailand needed to work harder to ensure their progress didn’t cause it to slip backwards.
“It’s like a running competition – if our pace is slower, others will overtake us, so we have to run faster.”
The dean of the Chulalongkorn Business School, Assistant Professor Wilert Puriwat believes he knows what the country must do to improve competitiveness.
“The survey found that skills among new university graduates have declined, especially in the area of critical thinking. We’ve failed the exam and it can’t be fixed by simply retaking the test – we need to restart learning.”
Assistant Professor Wilert says Thailand needs to change the way students are taught, adding that the country’s score on critical thinking in the classroom was the world’s lowest at 37 out of 100 points. Finland comes first, with 89 points.
Wilert points out that Thai students routinely perform poorly on tests compared to foreign counterparts, which can be blamed on an old-school reliance on rote learning through memorisation.
The WEF is urging Thailand to adapt a model that encourages creative and critical individual thinking in the classroom instead. It also recommends improvements be made in staff training in Thailand, and more fostering of digital skills.
SOURCE: The Nation
Samsung Electronics flags 56% fall in third quarter profits
“Samsung took advantage of the US trade ban against Chinese rival Huawei.”
Samsung Electronics says it expects operating profits to drop more than 50% in Q3 amid a continued slump in the global chip market. Operating profits for July to September was expected to reach 7.7 trillion won (US$6.4 billion), down 56.2% from a year earlier – this from the world’s largest maker of smartphones and memory chips.
It marks the fourth consecutive quarter in which the South Korean tech company has recorded a drop in profits in the face of falling semiconductor prices and weakening demand for its mobile devices. Sales for the third quarter were expected to drop 5.3% from the same period last year.
The South Korean tech titan leads the global smartphone market with a 23% share of the sector, trailed by Chinese competitors Huawei and Oppo, with Apple in fourth place, according to sales tracker IHS Markit.
Samsung withholds net profit and sector-by-sector business performance until it releases its final earnings report, which is expected later this month.
The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world’s 11th-largest economy, and it is crucial to South Korea’s economic health. Analysts voiced optimism for the coming months, noting that falling inventory levels for semiconductors – which account for more than half of Samsung’s profit – will help stabilise chip prices after double-digit drops this year.
Sujeong Lim, an analyst at Counterpoint Research, said, that in the mobile business, Samsung took advantage of the US trade ban against Chinese rival Huawei, “replacing a strong competitor in crisis” with its mid-to-low tier Galaxy A handsets.
“The new A series has turned out to be an effective weapon to take share from its Android competitors.”
Samsung appealed to high-end users with the launch of its first foldable smartphone last month after faulty screens forced an embarrassing delay in April. The firm also rolled out its flagship Note 10 devices which analysts say have sold far better than its previous models, giving Samsung a much-needed boost in its mobile sales.
The premium smartphone market has grown fiercely competitive and overall sales have cooled as a lack of major innovation has caused people to wait longer before upgrading to new models. Samsung has also been caught up in a trade war between Japan and South Korea stemming from World War II disputes.
The row saw Tokyo impose tough restrictions on exports crucial to South Korean tech giants in July, and Samsung vice chairman Lee Jae-yong – who called the situation a “crisis” – has visited Tokyo to secure materials. Adding to Samsung’s woes, Lee is currently facing retrial over his role in a massive corruption scandal that brought down former president Park Geun-hye.
He was initially jailed for five years in 2017 on multiple convictions including bribery, which was reduced to a suspended sentence on appeal, only for the Supreme Court in August to order a retrial.
SOURCE: Agence France-Presse
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