News Alert: In talks to divest InTime Retail, to refocus on core e-commerce
- Alibaba is considering selling its InTime department store units, according to Bloomberg
- InTime Retail was privatised by Alibaba in 2017, at a valuation of c.US$4bn, playing a pioneering role in its New Retail strategy
- Reason for the planned divestment is operational complexity in business integration; Expect minimal earnings impact on Alibaba
Alibaba exploring sales of InTime Retail unit. Alibaba is reportedly considering selling its retail department store, InTime Retail, according to Bloomberg on 2 Feb 2024. The negotiation has yet to be finalised, but Alibaba has reached out to various companies to gauge their interest in acquiring the network of over 100 stores and malls across the country. Alibaba did not comment on the news. InTime Retail, established in 1998, originated in Hangzhou and expanded nationwide. The company is involved in commercial retail, commercial real estate development, and equity investment. In April 2014, Alibaba invested HK$5.4 bn in InTime Retail and established a joint venture. In 2017, InTime Retail was privatised by Alibaba, at a valuation of c.US$4bn or c.HK$31bn. Alibaba reportedly holds 74% of InTime Retail after privatisation.
Expect minimal earnings impact on Alibaba. Alibaba has not disclosed the revenue and earnings contribution of InTime Retail since consolidation. As of 2016, InTime Retail’s net profit was Rmb1.3bn, or c.2% of Alibaba’s net profit in the same period. We expect the potential divestment of InTime Retail will have minimal financial impact on Alibaba. The acquisition PE was 18x in 2017, we think the divestment is probably higher than BABA’s 8x. But the value unlock is relatively small. InTime Retail is viewed as the pioneer of Alibaba’s New Retail strategy, targeting to integrate online and physical retail to create a seamless shopping experience for consumers. Yet, the synergies with InTime Retail have not met expectations, due to operational complexities in business integration. We believe the divestment aligns with the new management’s focus on core businesses, Taobao and Tmall group. The company is trading at 8x FY24F PE, c.1.5x SD below the historical average. Maintain BUY with TP of HK$133/US$134.