FT : Anticipation high on Alibaba’s maiden results

Anticipation high on Alibaba’s maiden results

NEW YORK, NY - SEPTEMBER 19: Traders work on the floor of the New York Stock Exchange while the price of Alibaba Group's initial price offering (IPO) is decided on September 19, 2014 in New York City. The New York Times reported yesterday that Alibaba had raised $21.8 Billion in their initial public offering so far. (Photo by Andrew Burton/Getty Images)©Getty
How do you grow when you are already huge? That is the question analysts and investors will be asking as they tune in for Alibaba’s first quarterly earnings report as a publicly listed company on Tuesday.
In September, the Chinese ecommerce company raised a total of $25bn on the New York Stock Exchange in a record initial public offering. Now valued at $243bn, Alibaba is second only to Google in size.

But everyone who bought Alibaba’s shares wants to know how the company can keep growing, given the inevitable declining returns to scale of platforms such as Taobao, the Ebay-like consumer-to-consumer website that has been the engine of Alibaba’s growth for the past five years.
They also will be keeping an eye out for any signals on how Alibaba plans to take on rival Tencent, which has a commanding lead in smartphone users thanks to its WeChat instant messenger app, and how it plans to make the leap from desktops to smartphones.
In addition to the big picture, though, analysts will be looking at some key numbers:
Revenues: Alibaba saw total revenue grow from $1.9bn in the 2011 financial year to $8.5bn in financial 2014. That 64 per cent compound growth rate is not sustainable, but analysts are still looking for robust growth in the region of 45 per cent. Ultimately most see this settling back: Goldman Sachs models revenues to grow by a compound annual rate of 25 per cent from 2016 to 2019.
GMV: Growth in any case is a function of gross merchandise value – the total merchandise sales by the third-party sellers on Alibaba’s China marketplace websites of Tmall and Taobao. GMV has already risen from Rmb663bn ($108bn) in 2012 to Rmb1,678bn in 2014, suggesting a two-year compound annual growth rate of 59 per cent, and doubly impressive given that overall retail sales in China are growing at a far slower pace of 12-13 per cent.
Nomura projects GMV to grow at a 30 per cent compound rate between 2014 to 2018, slightly below the growth they model in the expansion of Chinese ecommerce overall, as they believe Alibaba can keep its market share in most categories.
Many analysts are bullish because of the evolving structure of the Chinese economy: JPMorgan, for instance, believes that ecommerce will be 18 per cent of total Chinese consumption by 2018, up from 8 per cent currently.
Going mobile: Analysts are closely watching Alibaba’s shift from desktops to smartphones. The percentage of its gross merchandise value generated by mobile, which reached 32.8 per cent at the end of June compared with 12 per cent a year earlier. Given the wholesale switch to the mobile internet worldwide, but especially in China, keeping its top spot is especially important. Barclays expects Alibaba’s mobile GMV to outpace desktop by 2017 at Rmb1927bn vs Rmb1770bn, respectively, up from Rmb319bn vs Rmb1359b in 2014.
Alibaba has been searching for a killer app to challenge the leadership of Tencent’s WeChat and QQ, China’s most popular smartphone applications. In June, Alibaba bought UCWeb, a popular mobile browser company, and the two have announced a bid to jointly develop Shenme, a mobile search engine. Alibaba has also been working together with Quixey to design a similar mobile gateway app using Quixey’s app search engine. Analysts will be keen to hear any further explanation of Alibaba’s mobile strategy.
C2C to B2C: While Taobao has been the engine of Alibaba’s growth since the end of the last decade, the company has been moving the emphasis to Tmall, its business-to-consumer site that hosts larger retailers. Taobao accounts for 69 per cent of GMV compared with Tmall’s 31 per cent, but the two shares should be equal by 2017, according to iResearch, a Beijing internet research group.
Monetisation rate: Alibaba’s monetisation rate is relatively low – “plenty of room for improvement” as a report by Barclays points out – but some view that as the promise of substantial eventual upside. Barclays estimates the monetisation rate at 2.55 per cent for financial year 2014.

>>> Fed's Fisher (hawkish, FOMC voter): Strongly encouraged the FOMC not to reac

Fed's Fisher (hawkish, FOMC voter): Strongly encouraged the FOMC not to react to the market volatility in September, encouraged by the new wording of the FOMC statement 
- Fed needs to be careful not to create believe in a Yellen put- Yellen has proven herself to be neither a hawk nor a dove, but "impressively balanced"
- Very happy the statement dropped the term 'significant' in relation to the description of labor market slack
- The 'considerable time' component has been neutered by the data-dependent nature of the new statement
- The US economy is clearly approaching the 2% inflation level, with higher levels of employment
- The gap between current levels of unemployment and the natural rate of unemployment is less than 1%

(BFW) L’Oreal 3Q Rev. Misses Ests., Sees 4Q LFL Sales Improving

L’Oreal 3Q Rev. Misses Ests., Sees 4Q LFL Sales Improving
2014-11-03 17:01:14.394 GMT


By Heather Burke
Nov. 3 (Bloomberg) -- L’Oreal 3Q sales EU5.39b, est.
EU5.47b.
* 3Q total LFL sales growth 2.3%, est. 3.8%
* LFL sales growth by unit:
* Professional Products 2.6%, est. 2%
* Consumer Products down 0.4%, est. up 2.4%
* L’Oreal Luxe up 4.9%, est. 6.6%
* Active Cosmetics up 11.3%, est. 7%
* Body Shop up 1.2%, est. 0.1%
* Body Shop up 1.2%, est. 0.1%</li></ul>
* Says LFL sales growth should accelerate in 4Q, especially in
Consumer Products unit, should be boosted by “extremely
positive” FX effect
* W. Europe 3Q LFL sales down 0.4%, North America up 0.8%, New
Markets 3Q LFL sales up 5.8%
* Outlook: 2014 should be another year of improved economic
performance, with co. slightly outperforming the worldwide
cosmetics market, improving oper. profitability, increasing
its net EPS, in part from Nestle transaction
* Preview here

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To contact the reporter on this story:
Heather Burke in London at +44-20-7673-2044 or
hburke2@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net

(BFW) Smith & Nephew Still Seen as Potential Takeout Target: Bernstein

Smith & Nephew Still Seen as Potential Takeout Target: Bernstein
2014-11-03 13:32:10.435 GMT


By Catherine Larkin
Nov. 3 (Bloomberg) -- Smith & Nephew still seen with 35%
chance of being acquired even after Treasury Dept. rules aiming
to restrict tax inversions and failure of AbbVie-Shire deal,
Berstein analyst Lisa Bedell Clive says in note.
* Sees J&J, Styker as potential buyers; says neither deal
would hinge on inversion
* Sees SNN possibly getting offer up to GBP14.00 if bidder
does emerge, stand-alone SNN value of GBP11.50
* Doesn’t expect SNN to be willing seller, though “always
comes down to price” in the end
* Doesn’t expect SNN to be willing seller, though “always
comes down to price” in the end</li></ul>
* SNN new “Best of Bernstein” pick, rates outperform with PT
GBP12.40 (ADRs $39.50)


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To contact the reporter on this story:
Catherine Larkin in Chicago at +1-312-443-5968 or
clarkin4@bloomberg.net
To contact the editor responsible for this story:
Arie Shapira at +1-212-617-1488 or
ashapira3@bloomberg.net

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: THLD +29.7%, AU +8.6%, RYAAY +8.6%, MNDO +5%, ARNA +3.2%, INN +3.1%, PDII +1.6%, L +1.5%, BWP +1.1%, EEP +0.9%, SYY +0.7%

M&A news: SAPE +42.3% (Publicis (PUBGY) to acquire Sapient (SAPE) for $25 per share, or $3.7 bln in cash), CVD +29.5% (LabCorp (LH) to acquire Covance for ~$5.6 bln, or $105.12 per share), FUEL +8.1% (Barron's report suggesting name as Facebook (FB) takeover target), OIBR +7.5% (Altice announces it has made an offer for Portugal Telecom (PT) from Oi (OIBR)), PT +5.5% (Altice announces it has made an offer for Portugal Telecom), RCAP +1.2% (terminates agreement to acquire American Realty Capital's (ARCP) Cole Capital)

Select mining stocks trading higher: XCO +4.9%, GFI +3.1%, AUY +3%, GOLD +3%, IAG +2.1%, PAAS +1.3%, GDX +1.2%, EGO +1.1%

Other news: GERN +29.1% (announces removal of full clinical hold on Imetelstat IND), HOLX +3.1% (CMS issued ruling on 2015 reimbursement rates), PLUG +2.8% (positive Barron's mention), LCI +2.3% (announces positive FDA inspection results), ALU +2% (still checking), HLF +1.6% (to settle class action lawsuit, denies any liability), ISIS +1% (earned a $5 mln milestone payment from GSK (GSK) related to the designation of ISIS-GSK5Rx), RENN +0.9% (Sohu (SOHU) to purchase 56.com from Renren, according to reports out Friday)

Analyst comments: ICL +2.1% (initiated with an Overweight at Barclays), RGLD +1.5% (upgraded to Buy from Neutral at Goldman), SPW +0.7% (upgraded to Outperform from Neutral at Wedbush), TJX +0.7% (upgraded to Outperform from Neutral at Wedbush)

>>> US Early premarket gappers

Early premarket gappers

Gapping up: SAPE +41.5%, AU +8.8%, RYAAY +8.6%, PT +5.5%, AUY +4.5%, HOLX+4%, GOLD +3.4%, KGC +3.3%, GFI +3.1%, PLUG +3%, EGO +2.6%, ICL +2.1%, ACT+1.9%, GDX +1.6%, PDII +1.6%, L +1.5%, ABX +1.2%, GG +1.2%, BWP +1.1%, PAAS+0.9%, EEP +0.9%, HLF +0.6%

Gapping down: CYOU -8.5%, FRM -4%, BSBR -3.6%, NVO -2.6%, SNE -2.1%, STO-1.6%, TOT -1.6%, BUD -1.4%, HSBC -1.4%, GPRO -1.2%, BP -1.1%, CMRE -1.1%,ARNA -0.9%, SOHU -0.7%