Alibaba Net More Than Doubles After Commissions Increase
Alibaba Group Holding Ltd., China’s largest e-commerce company, had profit that doubled in the three months ended in December after commissions likely increased on surging sales.
Net income at Alibaba jumped to $642.2 million in the quarter ended December from $236.9 million a year earlier, according to a Yahoo (YHOO)! Inc. filing to the Securities and Exchange Commission. Revenue rose 80 percent to $1.84 billion, Sunnyvale, California-based Yahoo, which owns about a 24 percent stake in Alibaba, reported. John Spelich, an Alibaba spokesman in Hong Kong, declined to comment today.
“The majority of growth is likely to come from commissions,” Victor Yip, an analyst at UOB-Kay Hian Ltd. in Hong Kong, said by phone today. “Transaction volumes were up.”
Jack Ma, Alibaba’s billionaire executive chairman, said last year the company may go public within five years. While Alibaba has said it has no timetable for an initial public offering, analysts are anticipating an IPO this year or next. The valuation could reach $62.5 billion, according to the median of eight estimates by investment banks and research firms since February, based on data compiled by Bloomberg.
“Their strong growth is good news before the listing,” Yip said.
Proceeds from the IPO would be used along with additional cash to buy back stock held by Yahoo, a person familiar with the situation has said.
Yahoo gained as much as 6.4 percent to $26.79 in New York trading, the biggest intraday gain since Oct. 23 and the highest level since June 2008, before closing 3.6 percent higher at $26.07. Shares have gained 31 percent this year.
Alibaba doesn’t sell merchandise itself. Instead, it runs platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, a cross between Amazon.com Inc. and EBay Inc. (EBAY)
“The results were better than we expected, probably because of stronger revenue from commissions,” said Alex Wang, a Beijing-based analyst at Internet consulting group iResearch. “This will be positive for their anticipated IPO.”
The value of goods sold on Alibaba this year may reach about $330 billion as more Chinese shop online, Wang said.
Morgan Stanley estimates Alibaba’s revenue for the 12 months through December of this year may increase 59 percent from 2012 to $7.48 billion, and another 44 percent in the next year, analysts Jordan Monahan and Scott Devitt said in a March 6 research note.
Net income this year at Alibaba may reach $2.18 billion, more than double last year’s $746.3 million, according to the Morgan Stanley note.
“Companies usually will dress up their margins before IPOs,” said Echo He, an analyst for Maxim Group LLC in New York. “U.S. investors have an appetite for Chinese Internet companies, especially ones with dominant market share in China.”
Online retailing in China more than doubled each year from 2003 to 2011 and is projected to more than triple to $395 billion from 2011 to 2015, according to a McKinsey & Co. report in March. China had 564 million Internet users at the end of 2012, 10 percent more than a year earlier, according to the government-run China Internet Network Information Center.
In a move to strengthen its mobile business, where an increasing number of shoppers place orders, Alibaba last month said it paid $586 million for an 18 percent stake in Sina Corp.’s Weibo unit, which is China’s largest Twitter-like service. That gives Alibaba access to the company’s 46.2 million daily active users -- 75 percent of whom access the service through mobile devices, according to Sina.
Alibaba said in April it was working with five Chinese handset makers to use its operating system, called AMOS, as it takes on Google Inc. and China-based Tencent Holdings Ltd., which runs a messaging service, for mobile-device users.
In addition, Alibaba is offering a credit-payment service to provide consumer credit to Taobao Marketplace and Tmall.com shoppers. The credit limit is as much as 5,000 yuan ($812) per month, according to the company.
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