Live on Bloomberg TV

00:00The equity market and what you're seeing possibly is that maybe that these tech players are doing a little bit better in terms of cash flows but overall your take on these earnings. Good morning Yvonne and David. Yes actually I actually remember discussing with you in the third quarter of results and I would say our view at that time which is you know stable credit quality for Alibaba given still stable and healthy operating cash flow and free cash flow. That view is still pretty much sense. Some headlines on on the results. Revenue audits show resilience where increasing contribution from the neuro business such as cloud and direct sales helped lift the full year revenue growth to 19 percent year over year. But margin did continue to decline because of these new businesses carry lower profitability than Tambo in Timor. The more traditional e-commerce businesses one bright point which still is steady from last quarter is reported. Cash flow from operations for the year is very healthy. Still around twenty three billion U.S. dollars and leverage stay at lower and at low levels. OK. Not from a credit rating perspective your rating is what our rating on Alibaba is a once stable which is reflective of the very pristine financial profile. OK now let's try and map this out ahead because it's not as if this company is going to have trouble servicing its debt. I mean it's all relative but as it matures slowing growth in our margins. What have you can't can can that be credit negative. And just help us understand from your perspective what would constitute something of something that would make you rethink your rating on the stock on the bonds. I think from a credit perspective David what we monitor is anything any changes fundamentally that would shake the credit strength that drives such a high rating for Alibaba. And you know looking at what happened in the last 12 to 18 months and in the changes in the market environment we do think potential risks and uncertainties could come from two fronts going forward. First is slowing economic growth. As you have all seen the April headline macro data for China does point to some slow some slowdown in economic growth. And the most reason on lockdown in some cities did result in a lot of supply chain bottlenecks. And you know all that would just weigh on consumer demand which in turn could dampen revenue and earnings growth for all players in that whole ecosystem. Second potential source of risk could remain on the regulatory side. ISE. I don't think we are completely you know back to no no issue stays on the regulation side. And high trust regulation which encouraged competition will continue to increase the cost of doing business in general and earnings growth will lack top line revenue growth because of such increases in the costs and all these new invest it investments that companies do need to put in to fend off competition. You mentioned that allows Internet companies have reduced their acquisitions here while also increasing spending on on ESG the social side of things. From a credit perspective is that positive. Yeah I think that there are two layers of things evil. I even asked you know as we found out in the recent published report we looked at the way that these Internet companies changes the use of the very steady hand the healthy cash flow they generate from operations instead of spending on acquisitions more. We have seen companies increasing the use of cash flow and investment in environmental and social initiatives such as bolstering their green operations helping them digitize and expanding employee benefit coverage. Now in the near term that's the first layer of things. These are all added cost and that will happen alongside investments that will that will go into the new businesses. But in the longer term because these roles whether it's social environmental they are aligned with the government and regulators longer term goals. So if they do it well if they manage it well you will concede it will contribute to the more sustainable growth for the industry and for themselves as well. All right. Speaking of the industry Lena you all to cover others. I think it's by new jaded me if I'm not mistaken and alter tense and just help us understand anything different you know. Compared to Ali Baba compared to those companies. I'm David on the operational trend on recent results. All these companies announced their physical and first quarter 22 results very recently because all these are market leaders in online retail and consumer services segments. They cannot be totally exempt from the slowing economic growth or the increased regulatory scrutiny. Yet the two key sources of risk that we have discussed so we have actually seen relatively similar trends amongst them. Revenue growth slowing from high basis declining margins because of the investment required into new business. It's more so of a sector phenomenon. I would say. But that said you know there's another similarity that they all have very strong financial profiles as which can act as buffers against these risk. And those are reflected in the high ISE ratings that have.

No schedule data available.

BTV Channel FinderWatch BTV in your area

Moody’s Lina Choi on Alibaba Credit Outlook

Moody’s Investors Service Senior Vice President Lina Choi discusses Alibaba's credit outlook after the tech giant reported a better-than-expected revenue. Moody’s currently rates Alibaba at A1 stable. Choi speaks to David Ingles and Yvonne Man on "Bloomberg Markets: China Open". (Source: Bloomberg)

More From Bloomberg Markets China Open
All episodes and clips