Goldman Sachs discusses its divergent expectations for Tencent and Alibaba earnings

yes so we're trying to internet up around 15% year to date uh we do expect quite a differing setup for 1q earnings which is the March quarter we're expecting over 20 around 20% earnings growth from 10 cent but it's like kind of mid to high single digit decline in earnings for Alibaba as they reinvest into e-commerce growth but as we look into the year-to-date performance then Ali at 10 cent has been up around 25% year to date and Alibaba has been mostly flat so we think it's mostly priced in of how the first quarter setup is looking but as we look into the results call and we Al we also have a tech night conference in next week all of these are what will management comment on the second quarter we're seeing that games are re accelerating at at early at 10 cent across their domestic and particularly International pipeline while for Alibaba and e-commerce we've seen stronger than expected partial growth in the past two months so these would be the key commentaries that we look out for into uh the the results and earnings calls Ronald on Baba I got to ask you uh March quarter they bought back nearly $5 billion of their own stock or do do you think they're done or are we listing out for more yes so shareholder return is one of the four key themes that we highlight for for China internet which is shelder returns providing a downside protection to our stocks which are either in very value territory or in the gar territory in terms of PE multiples versus their growth rates uh for shelder return we we expect alibaba's full year buyback plus dividends is tracking at around High single digit of market cap that is the amount that they buy back their shares plus a an annual dividend that we expect to be declared in the in the results for 10 cent is around a mid single digit sh the return policy from BuyBacks and and dividends as well so these 5% to up to nearly High single digit percent return of capital do provide some of the key themes that we expect which is shoulder return protecting the downside while we expect uh the the fight back of the incumbents to be uh to be the key theme for this year as well with Alibaba fighting back e-commerce market share and that starts from gmv that starts from Parcels but gradually translating to that ad revenue and therefore a turnaround in EPS trajectory in around two quarters Ronald how lean is advertising Revenue going to be for the China internet names given the uncertainty that continues in the broader Chinese economy yeah so eCommerce will still be the key driver of advertising which is what we call Performance Based or Roi based and therefore Merchants are still focusing on the highest efficiency channels to place advertising uh we this is the June 18th setting up for the next shopping Festival so e-commerce names we still see strong we we got performance-based advertising but within our subs sector preference we like internet verticals which are less exposed to the the the end consumer uh tracking of consumption every week every month verticals like online music like online recruitment online Freight matching these are our preferred sub sectors which is the internet verticals there's also education and games that we expect this uh strong online penetration driving uh for for online education and games with re accelerating titles growth from the two key Publishers which are tensent and net EAS um and therefore for avertising particularly non-performance based uh it's one of our less preferred sub sector which are the search based or non transaction based ads will will not be as solid uh given that we think Merchants are spending on where they could track the ROI of their Investments

Channel: CNBC International TV

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Keywords: Asia: Squawk Box

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Length: 3min 47sec (227 seconds)

Published: Mon May 13 2024