What Singapore Investors Need To Know About Chinese eCommerce Giant Alibaba’s Latest US$1 Billion Acquisition

A few days back, Chinese eCommerce giant Alibaba had made a big splash in the Southeast Asian e-Commerce scene with its announcement that it would be acquiring a controlling stake in Lazada for US$1 billion.

Lazada is a leading eCommerce platform in Southeast Asia with operations in six countries, namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The acquisition will also allow Alibaba access to Lazada’s 10 automated warehouses across the region.

Gaining a foothold in Southeast Asia

Currently, eCommerce makes up only 3% of total retail sales in Southeast Asia. For perspective, eCommerce retail sales had accounted for 7.5% of the total retail market in the U.S. in the fourth-quarter of 2015.

Investors in Singapore may remember that Alibaba had first acquired a stake in the Singapore-listed Singapore Post Limited (SGX: S08) back in 2014. Singapore Post’s legacy business is in the fulfilment of postal services, but in recent years, the company has been positioning itself as an eCommerce logistics services provider across Southeast Asia.

Late last year, Singapore Post had conducted an experiment together with the Infocomm Development Authority of Singapore for the use of a drone to conduct last mile mail and packet deliveries. Successful product fulfilment (delivery) is an important part of the eCommerce ecosystem.

So, the acquisition of Lazada is not the first time that Alibaba has tried to make inroads into Southeast Asia’s eCommerce market. If Lazada is successfully integrated with Alibaba’s own platforms, then both companies can gain direct access to a new market of buyers and sellers.

Regional eCommerce, local opportunities

With Alibaba’s bold acquisition of Lazada, let’s take a look at other companies in Singapore’s stock market that have exposure to eCommerce.

The first is Hutchison Port Holdings Trust (SGX: NS8U), a business trust with a portfolio of deep water container ports in Hong Kong and China. eCommerce portals allow consumers in one corner of the world to purchase goods from the opposite end of the globe. But, for the product to arrive at the consumer’s doorstep, it has to be delivered, and that could be via air- or sea-freight.

The second is CWT Ltd (SGX: C14), an integrated logistics and supply chain management company that provides freight logistics and warehouse services. Although commodity marketing is the company’s biggest segment by revenue (89% of total revenue in 2015), the firm’s logistics services segment, which includes freight logistics and warehouse services, is the largest by pre-tax profit (40% of the total pie). CWT has business interests not just in Asia, but in Europe, Africa, North America, and South America too.

A Fool’s Take

Alibaba had spiced up the eCommerce scene in Southeast Asia with its purchase of a controlling stake in Lazada. Although Singapore Post may be the most visible company in Singapore’s stock market with exposure to eCommerce, there are other companies – such as Hutchison Port Holdings Trust and CWT – that are also indirectly or directly plugged into the scene too.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat does not own shares in any companies mentioned.