Alibaba's US$1.4b deal looks sweet after unit's 52% melt up

[HONG KONG] A little-known unit of Alibaba Group Holding Ltd is making the most of a sudden melt up in its shares to raise a whopping US$1.4 billion.

Alibaba Health Information Technology Ltd said Tuesday it will sell new shares to help fund the purchase of some health-related assets from its parent company, the Chinese retail giant Alibaba.

While the issue price - at HK$5.80 per share - is technically a good deal compared to Monday's close at HK$6.77 in Hong Kong, it follows a mysterious 52 per cent rally in the stock since May 16.

The gains have made Ali Health, which operated at a loss last year, the best performing stock on the MSCI Asia Pacific Index this month. The shares, which repeatedly generated more turnover than most of Hong Kong's biggest companies on its busiest days last week, hadn't traded at the issue price in almost two years. They jumped as much as 12 per cent Tuesday to HK$7.55.

Ali Health wasn't covered by a single stock analyst until earlier this month. Alibaba Pictures Group Ltd, another unit of the retail behemoth, surged 32 per cent on May 24 for no apparent reason as mainland buyers piled in.

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