Analyst Note| Iris Tan, CFA |
We have more visibility regarding the regulator’s expectations for Ant Group’s restructuring and we think these also apply to China’s fintech industry as a whole. Overall we believe the regulator’s guidelines for Ant’s restructuring are within our expectations for all Ant’s financial activities to be subject to regulations, on par with traditional financial institutions, as mentioned in our Alibaba report published in January. At the current stage we expect the valuation impact of Ant’s restructuring tilts toward our base case and bear case assumptions, resulting in a 29% to 55% reduction to our prior IPO valuation for Ant. The respective cut to Alibaba’s fair value estimate is minimal at 0% to 3%, implying a fair value estimate ranging between USD 313 and USD 304. Alibaba is cheap in either case. We have accounted for the contribution from its holding of the 33% stake of Ant. Alibaba did not disclose the contribution of Huabei to its gross merchandise value but said it is low.