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Equity Research Report: Ant Group

  • ID: 5185253
  • Report
  • October 2020
  • Region: Global
  • EqualOcean

Background

Ant Group (formerly Ant Financial), a spinoff of Alibaba Group (BABA:NYSE, 09988:HK), is planning a dual listing on the Hong Kong Stock Exchange and the Shanghai exchange's Star Market at a projected valuation ranging from USD 380 billion to USD 461 billion. According to some sources, the proceeds volume is estimated at USD 34.5 billion – which makes the fintech behemoth's IPO the largest in history.

The scale, however, is not the only reason. Much of the attention comes from what the firm is equipped with.

The tech giant runs its businesses in the fields of digital payments, digital financial services and other technology-focused areas.

The strong performance in payments and financial services has been the firm's key growth driver. It has also been increasingly deploying technology-based services within its main product – Alipay platform, leveraging a combination of blockchain, AI and computing, which pushed it to the top position in the Chinese fintech industry.

In this report:

The publisher presents a comprehensive outlook of Ant Group's businesses, analyzing the company's financial performance within key market segments. We delve into aspects such as competitive environments, regulations and technology, paying special attention to Ant's global expansion strategy. In the two distinct chapters, we dissect the main growth drivers and challenges facing the company in the short and medium term.

A result of months of research, expert interviews and thorough analysis, this report is a one-stop solution for global investors trying to assess the real value of Ant Group.

Key takeaways

  • As the prospectus revealed, Alipay has evolved from a payment tool to a financial supermarket, delivering a digital infrastructure that is increasingly embedded in people's daily lives.
  • Behind the massive figures, Ant Group has placed itself on the technological edge, which is driving the company's long-term development. Its technology advancements are reflected in the business performance. One indicator is the ever-growing transaction volumes during the 'Singles-day' shopping festivals every year.
  • Now, Ant is among the most active blockchain researchers globally, with the highest number of related patents; its risk management capabilities keep the fraud loss rate of Alipay below 0.000064‰, ranking it first globally, compared to the figures of 0.0001‰ for WeChat Pay and 1.5‰ for PayPal.
  • The integrated business mix mediated by Alipay platform, as the only user-facing channel, differentiates it from the competition.
  • Overseas, Ant Group is not only exploring the users through the international version of Alipay but is also utilizing technologies to globalize payment markets across regions.
  • With over 1.2 billion monthly active users globally, Tencent's WeChat has a significantly larger user base than Alipay’s 700 million (as of June 30, 2020). WeChat Pay has a strong competitive advantage in this regard.
  • The DCEP, the Chinese government's new project, will digitalize cash in circulation, becoming an alternative to and challenging Alipay.
  • In the global market, PayPal, with a more balanced user structure and even geographical distribution in advanced economies, is more competitive than Alipay.
  • Regulations targeting the payment and financial services areas in different countries are getting stricter as both the magnitude of fintech disruption and the likes of Ant Group become larger.
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