The suspension of trading for Alibaba Group Holding’s (BABA) owned Sun Art Retail Group has sparked speculation about a potential divestment of Alibaba’s stake in the hypermarket operator. This news comes from SCMP reports, which suggest that Alibaba might be looking to offload its holdings in Sun Art.
Back in October 2020, Alibaba acquired a controlling stake in Sun Art from the French Mulliez family for a hefty 28 billion Hong Kong dollars ($3.6 billion). Now, SCMP, citing Bloomberg, reports that Sun Art has received preliminary offers from private equity firms like DCP Capital and Hillhouse Investment.
China’s recent stimulus plans, aimed at boosting demand, have provided a much-needed boost to Chinese companies. Analysts like Shawn Yang of Arete Research and Appaloosa Management founder David Tepper believe Alibaba is poised to be a major beneficiary of these stimulus efforts, thanks to its strong market position.
However, Sun Art has faced challenges in recent times, with its topline revenue declining by 13.3% in the year ended March 31 to 72.6 billion yuan ($10.3 billion). This downturn can be attributed to the contraction of its supply chain business and store closures.
Despite these challenges, Alibaba reported a 4% growth in its fiscal first-quarter 2024 topline revenue, reaching $33.47 billion. While this fell short of analyst expectations of $34.81 billion, it highlights Alibaba’s continued growth, particularly in its international commerce retail business, which saw a remarkable 38% increase to $3.26 billion.
This focus on international expansion suggests a strategic shift for Alibaba, potentially signaling its intention to diversify its revenue stream beyond the Chinese market.
On Tuesday, BABA stock saw a 1.74% increase, closing at $107.97. This positive market response indicates investors’ confidence in Alibaba’s future prospects, despite the uncertainties surrounding the Sun Art divestment.
