Jack Ma's Ant worth more than Goldman?

BEIJING • Alipay started in 2004 as a way for Alibaba Group customers to more easily buy goods online. Now its parent company may be worth US$75 billion (S$102 billion) - more than Goldman Sachs.

That is the conclusion of Ms Elinor Leung, the head of telecom and Internet research at CLSA in Hong Kong. The number may not even sound that outlandish: Ant Financial, Alipay's parent company, was valued at about US$60 billion in June when it raised US$4.5 billion, sources said at the time.

Until the closely held business publishes some more financial data, it is hard to say whether that is a reasonable price. But there is enough information to say it is at least coming in at a generous valuation, Bloomberg's Gadfly columnist David Fickling noted.

Ms Leung estimates most of Ant Financial's value is in Alipay, China's most popular online payment service, with a projected worth of US$50 billion.

Its micro loans service is probably worth a further US$8 billion, while Ant's wealth management unit is given a valuation of US$7 billion.

The rest of Ant Financial's valuation is from investments and cash on hand, outstripping Goldman's US$70 billion market value as of last Monday.

"Alipay has a very strong leadership in terms of online payment ecosystem," Ms Leung said. "Alipay is not just for payment." It is also a "big distribution platform for Ant Financial's other products".

Alipay handled 153 million transactions a day in the first quarter of this year, compared with 180 million at Mastercard and 260 million at Visa in the preceding quarter, according to a company presentation. The parent company could grow to US$100 billion in two years, as the current valuation does not include growth brought in by insurance, credit scoring and cloud computing, Ms Leung said.

Ant Financial is considering an initial public offering in Hong Kong in the first half of next year, people familiar with the matter said last month. If it goes ahead, Ant Financial could rank among Hong Kong's largest debuts ever.

Even a 10 per cent float, lower than average for the city's market, could end up raising US$6 billion based on Ant's June-round valuation. Ant is controlled by Alibaba chairman Jack Ma, and Alibaba would benefit from such an IPO through either an option to buy a one-third stake or a one-time payment.

But Ant will have its work cut out to justify the valuation and growth rate it promises, Mr Fickling wrote. In its first eight years of making profits, Amazon's annual pre-tax earnings fell just once. That royalty fee income Ant pays to Alibaba fell by one-third last year.

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A version of this article appeared in the print edition of The Straits Times on September 22, 2016, with the headline 'Jack Ma's Ant worth more than Goldman?'. Print Edition | Subscribe