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Capital Calls: A grim reading from Ant’s valuation tea leaves

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A logo of Ant Group is pictured at the headquarters of the company, an affiliate of Alibaba, in Hangzhou, Zhejiang province, China October 29, 2020. REUTERS/Aly Song/File Photo

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HONG KONG, May 4 (Reuters Breakingviews) - Concise insights on global finance.

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LOW FIDELITY. Shareholders have their work cut out recalculating the value of Ant. Investors from Temasek to Carlyle (CG.O) are stuck holding shares of the Chinese financial technology group after its failed initial public offering. Regulators have forced Ant to overhaul key business practices read more , and a political campaign against founder Jack Ma read more adds more uncertainty.

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U.S. asset manager Fidelity Investments has repriced its stake. In a February filing it marked down its position by half compared to August last year, implying a total valuation of $144 billion for Ant, the Wall Street Journal reported read more .

That looks generous. Take Ant’s stable digital payments business. If the unit resumes its pre-pandemic growth rate of 17% achieved in 2019, that implies revenue of 61 billion yuan this year, based on annualised 2020 figures. U.S. peer PayPal (PYPL.O) boasts a 15% operating profit margin and an enterprise value 46 times forecast operating profit. On those assumptions, the payments arm is worth only $64 billion. Ant’s other business units could get smaller yet. (By Robyn Mak)

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