“Ant” financial services grow into a trillion Big Mac, who will share this IPO feast

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Author: Zhang Yuan Ke Wang Hai
No. 556, Xixi Road, Xihu District, Hangzhou, where ant group is located.
On July 20, Alibaba founder Ma Yun came here. Many ant employees cheered and took photos with them.
What makes ant employees more excited is that on the same day, ant Technology Group Co., Ltd. (hereinafter referred to as “ant group”) announced that it would launch a plan to seek simultaneous issuance and listing on the main board of the Shanghai Stock Exchange’s science and technology innovation board and the stock exchange of Hong Kong limited. A large number of them are about to usher in wealth freedom.
According to the 2019 annual report disclosed by Alibaba, in the equity structure of ant group, Alibaba company holds 33%, and employees of Ma Yun, Ali department and ant department hold 50% shares through Hangzhou junao and Hangzhou Junhan. Ma Yun still has more than 50% of the voting rights on ant financial services.
A + H synchronous marketing hammer! When the reporter asked Ali staff holding the shares of the affiliated company, some people said they were very excited, saying that although they had a premonition, they still celebrated with their families on the day when they learned the news. Some employees also said that the ant group said it would go public for a long time, and Ali’s acquisition of ant shares was a forewarning. “In reason, but some unexpected, did not expect a shares and H shares listed at the same time.”
“We are pleased to see that the science and technology innovation board and the Hong Kong Stock Exchange have launched a series of reform and innovation initiatives, which have created good conditions for new economy companies to better obtain capital market support, including international capital support. We are very glad to have the opportunity to participate in them.” Jing Xiandong, chairman of ant group, said that listing can make the company more transparent to the world and the public, and will better share the company’s achievements and future with the whole society.
Hit the exciting point of the market
The rumor that ant financial services is going to be listed has been circulated in the market for several times.
In December 19, 2019, Alipay’s parent ant ant suit announced a new personnel adjustment: President Hu Xiaoming became CEO, and Jing Xian Dong served as the chairman of ant clothing. Whether the equity relationship with Alibaba is clear or the personnel adjustment, these measures are interpreted as ant financial is paving the way for the upcoming IPO.
According to qixinbao data, on July 15, the original name of “ant financial services” was changed from “Zhejiang ant small and micro financial service group Co., Ltd.” to “ant Technology Group Co., Ltd.”.
On the day of the release of the listing plan, Jing Xiandong said in an internal letter of the company that listing is exciting to outsiders, but it means greater responsibility and responsibility for the company. Jing Xiandong put forward three requirements to all ant people, namely, to maintain mission and responsibility; to maintain humility and awe; and to keep calm and calm.
After the IPO Financing, ant group will further support the digital upgrading of the service industry, expand domestic demand, strengthen global cooperation, help the global sustainable development, and support the company to increase technological research and innovation.
Listing has never been the ultimate goal, he said, but a new starting point for better fulfilling the mission. “Because we believe that being a good company is more important than being a big one, and that should not be changed at any time.”
Jing Xiandong asked the company to keep calm. However, after the news was announced, the market was obviously not “calm” in the face of the appearance of a large “unicorn”.
On the 21st, ant financial services concept stocks, Alibaba concept stocks and even technology stocks burst out, with the ant financial services index up 4.18%.
Among them, the shares of several listed companies, including Beijing energy real estate Co., Ltd., Xiangyou Technology Co., Ltd., Fenghuang Media Co., Ltd., Zhangjiang high tech., Haitai Development Co., Ltd., Hefei Urban Construction Co., Ltd., and Junzheng group rose. The main net inflow amount of Zhang Jiang high tech, Fosun medicine and Phoenix media reached 530 million yuan, 308 million yuan and 212 million yuan respectively.
In terms of Hong Kong stocks, Alibaba (09988. HK) rose 7.26% to HK $257; China trend (03818. HK) rose 33%; Ali health (00241. HK) rose nearly 14%; CICC (03908. HK) rose 3.11%.
According to the previous report of first finance and economics, there are 40 ant group concept stocks in a shares, with a total market value of nearly 2 trillion yuan. Among them, China Life Insurance, PICC and Xinhua insurance directly participate in ant group, with a total shareholding of 1.72%; indirect shares of ant group include Greenland holdings, Zhangjiang High Tech, giant network, jiankangyuan, etc.; the shares of ant group include Hengsheng electronics, Weining health, Langxin technology, etc.; CAITONG securities, Chuangye Huikang, Shentong Metro and other companies have direct shares in ant group Ant group has business cooperation. When a + H is listed in both places, the relevant stocks have obvious fund-raising effect.
How to estimate 200 billion US dollars?
Several stocks rose and ant group listed valuation expectations are not unrelated. Although the government has not made a clear statement on the final valuation, the speculation of a market value of up to $200 billion has already exploded the market. Roughly calculated according to the exchange rate of US dollar to RMB, the market value of 1.4 trillion yuan is undoubtedly the new “Big Mac” in the secondary market.
As of the deadline, the market value of Google. O is about 1.07 trillion US dollars, Amazon (AMZN. O) is about 1.6 trillion US dollars; China Construction Bank (601939. SH) is 1.59 trillion yuan, and Ping An of China (601318. SH) is 1.48 trillion yuan. In other words, after the listing of ant group, it will join the army of trillion yuan market value.
So, is the $200 billion valuation reasonable?
In 2015, 2016 and 2018, ant financial completed round a (about US $1.85 billion), round B (about US $4.5 billion) and round C (about US $14 billion). After the completion of round C financing in June 2018, ant financial’s valuation level has reached about $150 billion. The pre tax profits of ant financial services in 2015, 2016, 2017 and 2018 were 4.254 billion yuan, 2.906 billion yuan, 13.190 billion yuan and – 1.9 billion yuan respectively.

According to the prospectus submitted by Alibaba to the Hong Kong stock exchange, Alibaba acquired 33% of the shares of ant financial services with RMB 87.5 billion in September 2019. According to the investment income calculation of equity method accounting obtained by Alibaba from ant group, CITIC Securities predicts that the company’s profit scale will increase significantly in 2019, and the profit in the fourth quarter will reach about 15.48 billion yuan.
Zhou Ning, general manager of minsure investment, told the first finance and economics reporter that compared with traditional banks and other financial institutions, ant financial’s customers are younger and have greater growth flexibility. Therefore, the market has higher expectations for valuation increase. “Compared with international giants, ant group is no inferior.”
Zhou Ning said that the business of ant group includes Alipay, balance treasure, recruit treasure, ant treasure, network business bank, ant flower, sesame credit and so on.
The widely rumored valuation of $200 billion in the market is a further improvement on the basis of the $150 billion financing of round C in 2018.
Looking at the financial data of the market, ant financial services will earn 17 billion yuan in 2019. “If it is calculated at 40-50 times the PayPal valuation (which is the P / E ratio), and considering the overall growth rate of performance, it is estimated to be US $200 billion, which is acceptable to the market.” Zhou Ning said.
Yan Kaiwen, chief strategic analyst of Huaxin securities, said that the logic behind the market’s $200 billion valuation was based on expectations for future growth. “Although there has been a more adequate forecast, but in the long run there is still some room for growth.”
Yan Kaiwen believes that the investment logic for such companies should not rely on short-term speculation and quick money making, but regular and long-term investment similar to financial products. “It belongs to the new blue chip of slow rising type. After the short-term expectation is fully realized, it is very normal to have shocks, but in the long run, it is still upward.”
Ant group in the secondary market for capital attraction also comes from the recognition and affirmation of users. “In the past, there were not many companies listed on the A-share market, which not only had the characteristics of high growth and large volume, but also made people feel that life had changed.” Yan Kaiwen believes that new blue chips and new Big Mac companies represented by ant group are the embodiment of China’s new economic development. Companies with stable performance, growth potential and large volume will become “upstarts” favored by funds, insurance and banks in the future.
As of March 31, 2020, ant group has achieved strategic cooperation with a number of local partners in Bangladesh, India, Indonesia, South Korea, Malaysia, Pakistan, the Philippines and Thailand. The annual number of active users worldwide has reached about 1.3 billion.
At present, ant’s profit sources are divided into three parts: payment, consumer finance and technology output.
For the payment sector, the main source of profit is commission and service fee. At present, the charging rate of domestic payment is about 6 ‰ for b-end merchants, and no charge is charged for most of C-end customers. The rate of credit card and cash withdrawal is about 1 ‰; the rate charged overseas is several times higher than that in China, especially in b-end.
For the consumer finance sector, ant owns sub business sectors such as Huabei, jiebei and e-commerce loan, and cooperates with more than 200 external banks. By the end of March 2020, digital financial services including financial management, micro loan and insurance accounted for more than 50% of ant’s total income. For the technology output business, including the output of financial cloud and it technology capability, the technology output of wealth management, the opening of Huabei, the opening of insurance technology capability, the opening of merchant capability, etc.
Can the science and technology innovation board hold?
When ant group announced its IPO plan, it coincided with the first anniversary of the founding of the science and technology innovation board. After listing, whether it would lead to “water shortage” of the science and technology innovation board due to the obvious effect of “absorbing funds”. As of the time of press release, the total market value of 133 listed enterprises on the science and technology innovation board is about 3 trillion yuan, and the valuation of ant group accounts for almost half of the current valuation of the whole board.
Tang Zhehui, partner of Ernst & Young’s audit services, told the first finance and economics reporter that as a test field of China’s market reform, the science and technology innovation board shoulders the mission of promoting high-quality economic development through scientific and technological innovation, and carries the hope of comprehensively deepening the reform of the capital market, and the market carrying capacity already has corresponding conditions.
Yan Kaiwen believes that ant group seems to be huge in size, but it has little impact in the “big pool” of secondary market. From the performance of SMIC International A shares after listing, we can see that the science and technology innovation board is also ready to welcome large number of enterprises. He said that the trend of “moving” residents’ savings to the capital market has gradually taken shape, and the impact of liquidity will be smaller after bank financing funds and insurance funds are added to the shareholder queue.
Zhou Ning believes that the listing of ant group may form a certain capital pressure on the market in the short term, but it will also form a greater attraction for OTC funds. It is believed that it will continue to attract OTC funds and play a long-term role in improving the valuation center of the whole market. “In addition, holding a huge digital gold mine such as digital credit has strong scalability, and the multiplier effect will further evolve with the consumption upgrading and the increase of scene consumption, which will also support the high growth rate of ant group as a whole.”
Yang Delong, chief economist of Qianhai open source fund, told reporters from the first finance and Economics Bureau that although the science and technology innovation board has the ability to undertake Big Mac enterprises, if the “entry” of Big Macs is too intensive, it will not rule out the situation of capital diversion from the main board, the small and medium-sized board and the gem in the short term.