One of Alibaba's biggest revenue contributors is its Cainiao Smarts Logistics arm.

One of a handful of cross-border e-commerce logistics services providers, it's dedicated to serving the needs of Alibaba's customers in Taobao and TMall.

While profits have been generally growing in line with Alibaba's GMV, it's struggled to contribute to the group's profitability. However, it's also not bleeding the company - effectively breaking even while providing affordable shipping for Alibaba's customers.

This is possibly why Joe Tsai decided to buy out minority shareholders last March and scrap a spin-off and IPO of Cainiao. They bought out 36% minority stake at a valuation of about US$10.4 billion, which equates to 1.35X price/sales. It was a very generous offer given that JD Logistics and SF Express trade for 0.5 to 0.75 times P/S.

In any case, it's clear that management felt they couldn't deliver better valuation in the stock market for Cainiao as its purpose is an integral part of the Alibaba e-commerce ecosystem. It also might not contribute meaningfully to profits in the foreseeable future, as Cainiao must continue to invest in cross-border fulfilment capabilities.