March 30, 2017
The past 2 weeks or so, one of the biggest if not the biggest news in Malaysia
was the announcement of the Digital Free Trade Zone and Jack Ma's
participation in setting up a regional logistics centre for Alibaba in
Malaysia.
This news set a collection of stocks in the KLCI market on fire from logistics players, to online payment systems providers, IT companies that had nothing to do with e-commerce and even companies from China that were listed in KLCI running, purely because they are Chinese companies.
The interest it drove was staggering but its hard to blame the general
public - the KLCI stock market in general has had nothing much to
celebrate since the drop in oil prices as with just continuous negative
news there forth. A lot of people were just looking for a positive
reason to put money in the markets and this gave them the reason to.
Now
that the euphoria has cooled a bit and you have had time to digest all
the information out there - what can we make of this? And how can we
profit from this growth?
In our view, the idea is great one for Malaysia - provided it is executed successfully.
We can state examples of similar concepts like Penang Free Trade Zone
that has been great for state, enabling it to be an international
manufacturing hub as well as the MSC status which has led to a lot of
international companies setting up IT Services Centre's here in
Malaysia. We can also point to those that didn't work out - like the
Technology Park Malaysia, set up as a bio-tech hub, now filled with
mostly IT companies and also Cyberjaya which was touted as Asia's
Silicon Valley - now only home to a handful of IT companies not really
focusing on innovation - just taking advantage of the MSC Status, making
it cost competitive to set up a centre there.
So its never just about the idea, its about how well Malaysia is able to execute it.
And as of now, its too early to say but with Malaysia having experience
in setting up such zones in other industries as well as Jack Ma as an
advisor - that has definitely enhanced the chances of making this a
success.
So that said, how can you profit from this?
We
cannot ignore e-commerce growth. From a report from e-marketer, retail
e-commerce Asia-Pacific will continue to grow at a rate where by 2019,
it will be the only region in the world where the percentage of retail e-commerce sales exceeds the worldwide average.
Add to this fact, we are a young population with one of the highest adoption rate of online content and products - its hard not to be invested here.
However we must provide caution to the tale.
Example - if you are looking at logistic players such as GDex, Century,
Pos Malaysia and Tiong Nam - we must caution you that this is an
extremely competitive market. In Malaysia alone, there are roughly 100 different logistics companies and everyday we hear about newer start-ups like NinjaVan trying to capture market share in the logistics space.
We can only see this ending up one way, faster scaling, thinner margins and company consolidation. If you are looking to invest, we will recommend focusing on companies which you think will end up dominating due to size/infrastructure/network or have a specific niche in the industry. The rest are unlikely to survive in the long-run and that goes for any related investment in this space.
We
have been invested in companies that we feel will benefit from
e-commerce growth for some-time now. It was much easier 12 months ago to
get great value than it is now. Unless you are extremely aggressive in
your valuation, it hard to find any worthwhile investment at this moment.
However
to be perfectly honest, we do feel people in general are looking at the
wrong area. Investors are trying to look hard at find out of the many
stocks out there, who will win - when its pretty clear to us. Its
AliBaba. Everyone is trying to do something to enable Alibaba to succeed
here. If there is a company that is clearly going to be a winner if
this all works out - its Alibaba. The rest, you still need to pick a
winner out of maybe tens or hundreds of other players.
So
our suggestion is look at AliBaba, because we are pretty sure most of
the world aren't really focusing on the Asean region. We are pretty
insignificant in the bigger picture now but 600million people is not
nothing. Maybe you can find value in Alibaba's grand plan and maybe this
regional logistics hub for Alibaba is just the first piece of a big
jigsaw puzzle.
Amazon today is priced at ~$870, AliBaba is at ~$110.
https://www.laburlah.com/single-post/2017/03/30/Jack-Ma-effect---Now-that-the-news-has-cooled-a-little-what-can-you-do
