“We have subscribed”. This is what the fund managers say regarding Chinese internet giant Alibaba’s initial public offer on Friday (tomorrow). “We were also at a management presentation in New York to represent our interests.” The GAMAX managers add, “This is because it is apparent that the initial public offering was considerably oversubscribed.”
They see good reasons for the interest in the company. “Investors consider China’s ecommerce market leader, with its almost 50 per cent sales growth, to have good prospects.” Alibaba currently has 279 million users in China, producing sales of 2.54 billion dollars in the second quarter of 2014. In contrast to Amazon, Alibaba, which is in some ways a mix of eBay and PayPal, has higher profit margins, because it has no infrastructure such as warehouses or logistics centres. Compared to the same period last year, profit has tripled to 1.99 billion dollars in the second quarter.
The rapid growth is set to continue. This is what the GAMAX Maxi-Fonds Asien portfolio managers are keen to stress. “The company is so interesting because it can continue to grow as strongly.” The most important reason for this? “Internet penetration is currently under 50 per cent. 500 million Chinese people are not yet online. This corresponds to the population of the EU. And when they get a connection, if they are unsure where to go, they will end up back at Alibaba.”
These are good reasons for investors to invest in Alibaba. They do not share the unease occasionally voiced regarding the construction of a special purpose entity that was required in order to obtain a listing in New York. “This is a common construction which has also been chosen by Chinese technology firms Tencent and Baidu.” There are hardly any other options available to Chinese companies who want to open themselves up to international investors. “It is true that investors are not the owners of the company’s assets and, in a worst-case scenario, such as bankruptcy, they will probably end up with nothing. Especially in the case of Alibaba one should not overestimate the risks arising from the company’s legal form”, the GAMAX managers explain.
With your GAMAX Maxi-Fonds Asien International investment, you are investing in a concentrated portfolio of 50 to 55 positions in promising growth companies, selected on the basis of a bottom-up analysis. The managers also take into account the macro-economic environment of the individual countries in which they invest. On a regional level, the focus is on China.
