Alibaba

Alibaba.com Ltd., owner of China’s largest online-commerce site, has been the go-to marketplace for Western companies seeking gaskets, garden gnomes and gelatin. Disclosures that its salespeople helped defraud buyers may send business to rivals Google Inc. and Global Sources Ltd.


Since Alibaba announced the scam Feb. 21, its chief executive officer and chief operating officer resigned, and the Hangzhou, China-based company has lost about $1 billion in market value. The flagship of Alibaba Group Holding Ltd., which counts Yahoo! Inc. as its biggest shareholder, also may struggle to sign up new clients, analysts said.

Alibaba.com shares have fallen 14 percent in Hong Kong trading since the announcement, and three analysts downgraded their recommendations from buy to hold. Wuh, the top Alibaba analyst over the past year according to Bloomberg Absolute Return Rank, maintained his sell recommendation.
Alibaba fell 4.8 percent to HK$14.40 at the 12:30 p.m. trading break in Hong Kong after dropping as much as 6.5 percent earlier in the day.

Alibaba.com, founded in 1999 by Jack Ma, is a business-to- business, or B2B, website. Its target audience is companies in the U.S. and Europe buying from low-cost manufacturers in China, Vietnam and Pakistan, among others. The buyers typically are too small to travel thousands of miles to meet suppliers and inspect factories.
The company operates marketplaces in Chinese, English and Japanese. Buyers use the services for free while suppliers pay an annual fee of 29,800 yuan ($4,500) to appear on the English- language website as a “Gold Supplier” for a year, Spelich said.

The site offers tips for avoiding fraud and hosts a forum where users can notify each other of potential scammers. Alibaba also posts the names of suppliers who have been banned.
Alibaba.com may have been victimized by its own success, Wuh said. Sales more than tripled to $567.2 million in 2009 from $171.1 million in 2006, according to data compiled by Bloomberg.
That growth was fueled by company claims a third party verifies the credibility of all suppliers with paid memberships. Its database of registered suppliers almost tripled to 108,000 last year from about 30,000 in 2008, Wuh said.
The frauds recently disclosed involved vendors offering small quantities of electronics at attractive prices, with payments settled using “less reliable” methods, Spelich has said. Alibaba employees either intentionally or negligently allowed the vendors to evade authentication and verification measures, the company said.

Google Benefits

Google Inc., the Mountain View, California-based operator of the Internet’s most-used search engine, may benefit from sellers setting up their own websites and paying to show up on Internet queries, said Muzhi Li, an analyst at Mizuho Securities Asia Ltd. in Hong Kong.

Caroline Hsu, a spokeswoman for Google in Hong Kong and Taiwan, declined to comment on how the company’s business might benefit from the Alibaba fraud.
Another beneficiary may be Global Sources, a Shenzhen, China-based organizer of trade shows where buyers meet sellers of electronics, toys and lingerie, among other products, analysts said. It organizes 56 shows a year in locations including India, China, South Africa, Dubai and Miami.

Third-Party Checks
The company also operates a B2B site the competes against Alibaba. Online and other media services accounted for about 66 percent of Global Source’s $174.5 million in revenue in 2009, the last full year reported. Its stock is up 19 percent this year in New York trading.

Like Alibaba, Global Sources uses contractors to vet suppliers through factory visits and checks of business registrations and credit, Chief Executive Officer Merle Hinrichs said. The company has about 260,000 sellers, primarily in Asia, and about 970,000 buyers worldwide.
The strength of Alibaba’s model has been called into doubt, said Dane Chamorro, managing director for North Asia at Control Risks Group in Shanghai. His firm does background checks for companies.

‘Lost Their Way’

Although Alibaba tries to minimize the risks to buyers by vetting sellers, the system broke down because staff colluded with fraudulent sellers to bypass that verification process, said Elinor Leung, head of Internet research at CLSA Ltd. in Hong Kong. More than 2,300 vendors were involved, Alibaba said.

Alibaba CEO David Wei and COO Elvis Lee, who weren’t accused of wrongdoing, resigned to take responsibility for the “systemic breakdown” of integrity, the company said in a statement. About 100 salespeople were involved, the company said.

Jonathan Lu, 41, who heads the Taobao.com online retailing affiliate, China’s Ebay, replaced Wei.

That’s no small task, Li said. As many as 35 percent of Alibaba’s registered sellers don’t renew their one-year contracts, meaning the company needs to add about 35,000 new suppliers a year to maintain current sales.
The turnover rate at Global Sources is about the same, Hinrichs said.
The entire B2B industry will suffer from the Alibaba scam, he said.

Mid Valley Megamall market value @ RM1.92b

KUALA LUMPUR: The Mid Valley Megamall, which is owned by KRISASSETS HOLDINGS BHD ’s unit Mid Valley Megamall, has a market value of RM1.92 billion as at Dec 31, 2010 following a revaluation. The company said on Feb 11, 2011, this was a 3.78% increase over the RM1.85 billion when it was revalued on Sept 30.

KrisAssets said the net surplus of RM52.5 million (deferred tax at 25%) was recognised in statement of comprehensive income of KrisAssets group for the three months ended Dec 31, 2010.
“The total net surplus for the financial year ended Dec 31, 2010 is RM90 million, an increase of 6.67% compared with the preceding year. Based on the ordinary share capital and treasury shares as at Dec 31, 2010, the consolidated net assets per share of KrisAssets is RM3.52 per share,” it said.
It announced for the quarter ended Dec 31, 2010, the company recorded a 5.4% increase in revenue to RM61.79 million from RM58.63 million mainly due to higher total rental income.
Net profit rose 61.7% to RM80.11 million from RM49.54 million. It proposed a dividend of 7.5 sen a share, similar to a year ago.
Pre-tax profit rose 72.6% to RM107.4 million compared with RM62.2 million a year ago. This was mainly due to recognition of revaluation surplus of RM70 million as fair value gain on investment property in the current quarter compared with RM30 million in the corresponding quarter in 2009.
“Excluding the fair value gains on investment property, the group recorded pre-tax profit of RM37.4 million, representing 16.15% increase, compared with pre-tax profit of RM32.2 million in the corresponding period in 2009. This was mainly due to higher total rental income and lower maintenance and utility costs in the current quarter,” it said.
For the financial year ended Dec 31, 2010, earnings rose 47% to RM200.01 million from RM136.02 million while revenue increased by 5% to RM239.39 million from RM227.88 million.