Temasek Pares Alibaba Stake While Adding Rival

  • Investment firm owned 47.5 million Alibaba ADRs at end 2015
  • Temasek also increased its stake in Gilead Sciences, BioMarin

Temasek Holdings Pte pared its holdings in China’s biggest online retailer Alibaba Group Holding Ltd. in the fourth quarter while buying shares of other Chinese online companies, including Alibaba’s biggest competitor, Inc.

Singapore’s state-owned investment firm sold 548,769 American depositary receipts in Alibaba, leaving it with 47.5 million, according to a filing with the U.S. Securities and Exchange Commission on Tuesday. The value of the holding increased by $1.03 billion to $3.86 billion as the shares gained 38 percent in the period. Among Temasek’s new acquisitions were 6.1 million ADRs in Chinese online retailer and 8.2 million ADRs in Chinese online travel company Tuniu Corp.

The adjustments reflect a broadening of Temasek’s bet on China’s technology sector and industries servicing a growing middle class. Temasek first invested in Alibaba in the fiscal year ended March 2011, buying S$50 million ($36 million) of the company’s China registered shares.

“Over the last two quarters, JD’s growth momentum outpaced that of Alibaba,” said Henry Guo, a San Francisco-based analyst at Summit Research Partners LLC. “People believe that JD has the momentum to become a meaningful player in the e-commerce space. JD has a high brand awareness and better logistics services than Alibaba.”

Pharmaceutical Holdings’s revenue has grown 52 percent year-on-year in the three months ending September, while Alibaba’s top-line growth was 32 percent, according to data compiled by Bloomberg.

Guo expects increasing pricing competition between the firms from which Alibaba will emerge in a better position as it has the higher profit margin. The analyst has a buy recommendation on Alibaba and a hold on

Temasek increased its stakes in pharmaceutical maker Gilead Sciences Inc. by 1.4 million shares, and added 888,545 shares in BioMarin Pharmaceutical Inc., a maker of therapeutic enzyme products, according to the filing.

The investment company reduced its stake in medical service provider Quintiles Transnational Holdings Inc. to 639,172 shares from 4.1 million, according to the filing. The shares declined 1.3 percent in the fourth quarter after almost doubling since they were listed in May 2013.

Broader Strategy

Alibaba shares fell to $57.39 in September from a record high close of $119.15 in November 2014. The company, founded by billionaire Jack Ma, raised $25 billion in its U.S. initial public offering in September 2014, selling stock for $68 each.

After Temasek’s initial investment in Alibaba, it subsequently bought more stock from Alibaba employees, and boosted its holdings again in 2012 when Alibaba repurchased shares from Yahoo! Inc. and sold some to its existing shareholders. Temasek hasn’t disclosed the amount of China registered shares it holds.

The ADRs currently held by Temasek have been converted from its China registered shares.

Temasek also holds Alibaba ADRs through a unit called Seatown Holdings Pte, which cut its stake by 740,000 to 1.36 million in the fourth quarter, according to a separate filing earlier this month.

Money managers who oversee more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

Temasek added 27.4 million shares in Amyris Inc., a maker of renewable products. The bulk of those shares seem to be from the exercise of a convertible bond, according to Soddu.

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