Current regulatory headwinds are putting pressure on the valuations of many Chinese tech giants by depressing valuations, and causing a distraction from the evident scale, dominance, and cash-generative nature of these businesses.
We remain confident in the growth potential of both Tencent and Alibaba.
When considering valuations, it is important to consider the core-earnings power of firms like Tencent and Alibaba, which also have large investment portfolios. To achieve this, we have stripped out their massive investment portfolios, and consequently, revealed the intrinsic valuation of the underlying operations. At this level current value is extremely attractive!
Tencent is currently trading at HK$481.20, with their investment portfolio contributing a market value of HK$136.05/shr (29%).
Alibaba is currently trading at US$162.29, with their investment portfolio contributing a market value of US$46.64 (28.7%).