Alibaba VR?
Shares of Intime Retail Group Co Ltd (HKG: 1833) marched higher following news that Alibaba Group Holding Ltd (NYSE: BABA) CEO Daniel Zhang would become its chairman, according to a report originally published in the Financial Times, which noted that the "real and unreal collide frequently in Chinese markets" leading to a potential virtual reality for the two companies.
Since March, the stock of Intime Retail Group has moved up over 260 percent while Alibaba has held a stake in the company since March 2014. According to the report, Alibaba has invested in excess of $600 million in the company’s stock and convertible bonds.
Alibaba owns 26 percent in the Chinese department store and mall operator and the companies also have a joint venture to complement Alibaba’s ecommerce with Intime’s physical infrastructure.
“Last year, China's retail sales totalled $US4.2 trillion. Over the same period, Alibaba's websites facilitated $US370 billion in transactions; 9 per cent of the total. By tying up with Intime, Alibaba gains access to Intime's 44 locations in six provinces (and Beijing) for a token investment. It can distribute through those stores and use Intime's inventory. The benefits to Intime could be even greater. Its sales last year were $US2.5 billion, a fraction of Alibaba's,” according to the report.
While the path forward for the two companies was not entirely clear, Zhang joining Intime as its chairman might suggest “that concrete strategies may yet ensue,” the Times noted.
“After recent moves, the stock trades on 30 times 2017 forecast earnings per share. That is more expensive than Alibaba, which trades on just 23 times for more than 30 per cent growth per year. Intime needs real delivery to justify its unreal valuation,” the report concluded.
Intime Retail Group recently traded at HKD$14.78, down 3.40 percent.
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