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JD’s daily active users’ year-over-year growth of 25% in this quarter surpassed annual active customers’ growth of 21%

Post author By lvc-admin
Post date March 31, 2022
No Comments on JD’s daily active users’ year-over-year growth of 25% in this quarter surpassed annual active customers’ growth of 21%

Business Strategy and Outlook

JD’s growth in the number of third-party merchants was at the highest level in the last three years, as JD added more new merchants in the quarter than the previous three quarters combined. This will benefit the high-margin marketplace and advertising revenue, though t is held it will be partially offset by reduced fees for merchants amid more intense competition and reduced advertising budgets of merchants amid weaker consumer sentiment. The 98 million increases in annual active customers in the year, who are more likely to come from lower-tier cities, did not reduce average spending per user. Average spending per user was up 4.5% year over year in 2021, reverting from the 3.5% decline in 2020. This is in contrast with Alibaba, whose average spending per user declined by a low-single digit percentage year over year in 2021 due to a higher mix of customers from lower-tier cities. This means that either new users, as a whole, have average spending as high as the old users, or the old users have increased their spending levels to offset dilution from these new users.

JD’s share price has declined due to fears of delisting in the U.S., renewed concerns of a regulatory crackdown and increased common prosperity measures; it is likely such news will continue to weigh on investor sentiment in the near term. Other risks include uncertainty over the losses at the new businesses and whether the lagging impact of real estate weakness on home appliances and electronics will be worse than expected. Improved profitability, improving consumer sentiment in China, the U.S. and Chinese governments resolving the accounting problem, and signs of regulatory relief, will lead to a rerating in expert’s view.

Users’ shopping frequency and the range of categories purchased improved in this quarter. Average spending per user improved by 11% in the quarter for new users. Frequency of shopping by existing customers was up by 3% and average spending per user has increased by 4.5%. Daily active users’ year-over-year growth of 25% in this quarter surpassed annual active customers’ growth of 21%. These demonstrated JD’s stronger user engagement.

Financial Strength

The net product revenue or first-party gross merchandise volume growth estimate for 2022 is 16% now versus 25% previously. It is anticipated gross merchandise volume, or GMV, to grow 18% year over year in 2022, with third-party GMV growth of 19%. The total revenue is now 17% compared with 25% year over year previously in 2022. In 2022, the non-GAAP net margin is 1.9%, versus 1.8% in 2021 as new businesses and logistics improve profitability while JD Retail’s margin remains stable. Marketplace and advertising revenue in 2022 will grow at 20% year over year versus 35% in 2021. It is seen the growth of the home appliance and electronics segment accelerate in the fourth quarter to 21.7% from 18.8% in the third quarter despite macroeconomic uncertainty. This is helped by sales in offline stores in lower-tier cities. JD’s strong relationship with brands in the segment also helped it to secure inventory amid shortages.

Company Profile

JD.com is China’s second-largest e-commerce company after Alibaba in terms of transaction volume, offering a wide selection of authentic products at competitive prices, with speedy and reliable delivery. The company has built its own nationwide fulfilment infrastructure and last-mile delivery network, staffed by its own employees, which supports both its online direct sales, its online marketplace and omnichannel businesses. JD.com launched its online marketplace business in 2010.

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Dividend Stocks

Chorus posted solid 1H22 Results; Dividend guidelines increased and announced share buyback

Post author By lvc-admin
Post date March 31, 2022
No Comments on Chorus posted solid 1H22 Results; Dividend guidelines increased and announced share buyback

Investment Thesis

CNU trades on a dividend yield of ~4.7%.
Once UFB capex and capex on fiber network significantly fades, CNU is very cash generative and its capex will revert to maintenance spend.
Significant barriers to entry with high capex required for new competitors.
Benefits from population growth (i.e. potential for more connections) and increasing bandwidth requirements from trends such as end-users watching TV on the internet or increasing content on the internet.
Fiber remains the best possible broadband product and has become the preferred broadband product of choice for customers. CNU announced in January 2017 that CNU reached an agreement with the government to take fiber to ~200,000 more customers (on top of the 1.1m already planned for first year UFB roll-out). CNU commenced UFB2 rollout in July 2017, which is expected to complete around December 2024. This would result in high penetration with ~85% of NZ population with access to fiber by 2024. The NZ government provided an additional up to ~NZ$291m in funding (whereas other fiber companies received ~NZ$16m in funding to extend fiber to ~33k more premises).

Key Risks

Potential changes to management and strategy with new incoming Kate McKenzie.
Increasing prevalence in usage of wireless networks over fiber networks, especially in regional NZ, where there is either poor or no broadband coverage.
Any capital expenditure blowout.
Network outages or reliability issues.
Regulatory risk.

1H22 Results Highlights Relative to the pcp:

Revenues increased +1% to $483m largely due to gains from ongoing network optimisation programme.
Operating expenses declined -9.3% to $136m amid ongoing focus on reducing discretionary costs and decline in some expense lines due to Covid-19 restrictions.
EBITDA increased +5.8% to $347m, which combined with +2.4% increase in D&A expense amid growth in network asset base and -7.8% decline in interest costs due to the refinancing of debt at lower rates in 1H21 (weighted average effective interest rate declined -30bps to 3.7%) delivered NPAT of $42m, up +55.6%.
Capex declined -25.5% to $263m with fibre remaining the dominant category of spend at 85% and copper related expenditure continuing to trend downwards.
Credit metrics improved with net debt to EBITDA declining to 4.03x from 4.24x at 1H21, and well within bank covenants (financial covenants require senior debt ratio to be no greater than 4.75x) and BBB/Baa2 rating by S&P/Moody.

Dividend guidance increased + share buyback announced

Given the finalisation of crucial inputs by Commerce Commission for the new regulatory framework together with the subsequent increase in credit thresholds for CNU by ratings agencies (Moody’s and S&P recognise that the new regulatory regime now provides CNU with some certainty over the revenues that can be earned from the fibre network), management upgraded their FY22 dividend guidance by +34.6% to 35cps and forecast FY23 dividend to be a minimum of 40cps and the FY24 dividend a minimum of 45cps. CNU also announced a share buyback of up to $150m (might be suspended if management identifies more accretive opportunities for shareholder value to be realised).

Company Profile

Chorus Ltd (CNU) is a dual-listed (ASX and NSX) wholesale and retail telecommunications company based in New Zealand. CNU maintains and builds the Chorus local access network made up of local telephone exchanges, cabinets and copper and fiber cables throughout New Zealand.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.