Alibaba announces multiple new USD and CNH bonds at IPGs of up to 5.9%

Alibaba plan to issue multiple new USD and CNH bonds at initial price guidances of up to 5.9%. Here is our take on these new issuances.

iFAST Research Team
iFAST Research Team19 Nov 2024 953 Views
Alibaba announces multiple new USD and CNH bonds at IPGs of up to 5.9%

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Alibaba Group Holding Limited (Alibaba) plans to issue three new USD senior unsecured bonds with tenors of 5.5, 10.5, and 30 years. The initial price guidances (IPG) are T + 90bps, T + 115bps, and T + 130bps respectively (i.e. 90, 115, and 130 basis points above each respective UST yield). These translate to indicative yields of 5.2%, 5.6%, and 5.9% respectively. Alibaba also plans to issue four new CNH senior unsecured bonds with tenors of 3.5, 5, 10, and 20 years. These have IPGs of 2.9%, 3.1%, 3.4%, and 3.8% respectively.

The issuer has a credit rating of A+ (Stable) from S&P, A1 (Negative) from Moody’s, and A+ (Negative) from Fitch. Both USD and CNH new issues are expected to be rated A+ by S&P, A1 by Moody’s, and A+ by Fitch. Proceeds from the bond issuance will be used for stock share repurchases, offshore debt repayment, and general corporate purposes.

Alibaba was founded in 1999 and completed its secondary listing on the Hong Kong Stock Exchange in November 2019. Its current market capitalisation is approximately HKD 1.7 trillion. The Group’s core businesses span sectors like trading, e-commerce, search engines, third-party payments, and cloud computing services. Some well-known brands and investments under Alibaba include Taobao, Tmall, Ant Financial, Aliyun (Alibaba Cloud), Eleme, Hema Fresh, and Cainiao.

From April 2024 to September 2024, the Group reported operating revenue of RMB ¥479.7 billion, representing a 4.5% YoY increase. Adjusted EBITDA was RMB ¥98.5 billion, a 2.8% YoY decrease. However, its net profit attributable to shareholders surged by 58% YoY to RMB ¥43.8 billion, indicating a stable overall performance.

On the credit side, as of end-September 2024, the Group's total debt stood at RMB ¥202.3 billion, while cash & cash equivalents and short-term investments amounted to RMB ¥338.5 billion, making it a net cash company. Its leverage ratio, measured by total debt to adjusted EBITDA, is approximately 1.1x, signalling a healthy leverage profile. We think Alibaba’s profitability remains stable and its overall credit quality is solid.

It is also worth noting that Alibaba is actively promoting the adoption and application of cloud and AI technologies. According to research from Gartner®, Alibaba Cloud, the Group’s cloud computing service platform, has become the leading IaaS (Infrastructure-as-a-Service) provider in the Asia-Pacific region. The Group’s revenue from AI-related products has already achieved over 100% growth in Q2 of FY2025, and this is expected to drive future growth further.

Given the issuer’s strong credit profile, we believe investors may find these new bonds attractive, particularly the USD bonds, which offer relatively higher yields. However, it is important to note that the final yield may not be as high as the initial guidance.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.


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