Yamato: Alibaba-W (09988) allotment of shares has limited dilution effects, and valuations are still attractive

The Zhitong Finance App learned that Daiwa released a research report saying that Alibaba-W (09988) announced that it plans to place 710 million new shares, raising HK$80 billion. The placement price is HK$112.7 per share, which is equivalent to HK$115 per ADR. The net proceeds will be used to develop full-stack AI capabilities and expand AI infrastructure, respectively.

According to the bank, the proceeds from this fund-raising are about 73 billion yuan, which is equivalent to about 19% of the group's three-year AI infrastructure budget of 380 billion yuan, and about 38% of the remaining 190 billion yuan promise. It is also equivalent to less than 38% of the bank's 2027 capital expenditure budget of RMB 194 billion. It believes that allotments can greatly ease financial pressure, and equity financing will also avoid increasing debt and interest expenses, and preserve balance sheet flexibility. Previously, Daiwa predicted that the Group's free cash flow for the 2027 fiscal year would be negative 17 billion yuan.

This is Ali's first major placement since its listing in Hong Kong in 2019. Daiwa estimates that, based on the current 19.2 billion common shares, the placement will increase the number of shares by about 3.7%, which means that the profit per share and the dilution effect of ownership are similar. The 3.6% discount of ADR or consolidation of short-term stock prices near the placement price poses temporary technical pressure, but the current discount is relatively moderate. Based on Ali's current price, the core forecast price-earnings ratio for the 2027 fiscal year is about 17 times. Considering that the Group has full-stack AI capabilities, Yamato believes that its valuation is still attractive.