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JD.com Announces Pricing of Notes, Strengthens Balance Sheet

Zacks Equity Research

JD.com, Inc. (JD) recently announced an offering of senior unsecured notes aggregating $1 billion.

The first tranch consists of $700.0 million notes that carry an interest rate of 3.375% and are scheduled to mature in 2030. Another tranch consists of $300.0 million notes, carrying an interest rate of 4.125% due 2050.

The notes are expected to be listed on the Singapore Exchange Securities Trading Limited.

The company expects to receive net proceeds of approximately $988.3 million from the offering after deducting underwriting discounts, commissions and estimated offering expenses. It stated that the transaction proceeds will be used for general corporate purposes and refinancing.

BofA Securities and UBS AG Hong Kong Branch are acting as joint book-running managers for this purpose.

JD.com, Inc. Price and Consensus

 

JD.com, Inc. Price and Consensus

JD.com, Inc. price-consensus-chart | JD.com, Inc. Quote

Cash Position

At the end of third-quarter 2019, its cash and short-term investments totaled RMB59.2 billion (US$8.3 billion) compared with RMB39.5 billion as of Dec 31, 2018.

JD.com’s operating cash flow for the 12 months ended Sep 30, 2019 amounted to RMB30.8 billion (US$4.3 billion), up from RMB18.2 billion in the comparable prior-year period. Free cash flow was RMB15.6 billion (US$2.2 billion) versus outflow of RMB5.5 billion in the prior year.

We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving prospects. In our view, the senior notes’ offering will bring down the company’s cost of capital, in turn strengthening the balance sheet and supporting growth.

These notes should provide financial flexibility and propel long-term growth.

Share Price Performance

A glimpse of the company’s price trend shows that the stock has had an impressive run on the bourses in the past year. JD.com has returned 67% compared with the industry’s 21.8% rally in the said period.

Bottom Line

JD.com’s e-commerce unit remains a key growth driver. Its deepening focus on bolstering e-commerce footprint in international markets is a major positive.

In addition, increasing demand for the company’s home appliances, food and beverage, cosmetics, home furnishing, as well as baby products should continue to drive growth for JD.com. Notably, growing number of flagship stores of international brands on JD.com’s platform and new partnerships are likely to enhance product offerings.

The company is expected to release fourth-quarter earnings on Feb 27.

Zacks Rank and Other Stocks to Consider

JD.com currently carries a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader technology sector include MACOM Technology Solutions Holdings, Inc. MTSI, Itron, Inc. ITRI and Fiverr International Ltd. FVRR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for MACOM Technology, Itron and Fiverr is currently projected at 15%, 25% and 44.2%, respectively.

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