How Much Impact Can Jingdong Make On Its $1 Billion Bond?

At this year's Jingdong annual meeting, Jingdong group CEO Liu Qiangdong has clarified the three major directions of Jingdong's future development. It will focus on three major areas, namely, electricity supplier, finance and technology.

However, from the present point of view, Jingdong financial and Jingdong's two projects are still consuming funds.

As a large electric business enterprise, Jingdong has been losing money for many years, and has been making frequent moves in recent years, including improving logistics costs, increasing platform user fees and extending suppliers' accounts.

Recently, the Jingdong announced that it will issue a total of $1 billion of bonds, of which the interest rate of US $500 million will be 3.125%, which will expire in 2021, and the interest rate of another 500 million US dollars will be 3.875%, which will expire in 2026.

After the issue is completed, Jingdong bonds will be listed on the Singapore Stock Exchange.

Affected by the news, Jingdong's share price fell by 3.07% and 8.6% respectively in the next two trading days, and the market value of the two trading days evaporated 4 billion 400 million US dollars (nearly 30 billion yuan).

Not long ago, the Standard and Poor"s Corp awarded Jingdong a long-term corporate credit rating of" BBB- "and the rating outlook was" stable ".

It is understood that there are 10 levels of credit rating of standard & Poor's long-term bonds, while Jingdong's "BBB-" is exactly the fourth level. Because of the "-" number, it is in the last stage of "investment grade bonds".

In comparison with the previous BAT, the credit rating of Alibaba, Tencent and Baidu was A+, A- and N/A respectively.

In this regard, the industry believes that such a rating may be related to Jingdong has been in a state of loss.

Jingdong has only been in the market for two years since its listing. Such a large-scale issuance of debt must be a great demand for business.

In March this year, Jingdong released its fourth quarter and full year 2015 results.

According to the financial report, the net income in 2015 was 181 billion 300 million yuan (about 28 billion US dollars), an increase of 58% over the previous year, and the total paction volume (GMV) reached 462 billion 700 million yuan (about 71 billion 400 million US dollars), up 78% over the same period last year.

In addition to growth figures, Jingdong's losses have also raised concerns.

Under the general accounting standards of the United States (GAAP), the net loss of Jingdong attributable to common shareholders in 2015 was 9 billion 400 million yuan (about 1 billion 400 million US dollars).

The net loss in the same period last year was 5 billion yuan.

Jingdong group's Public Relations Department responded to the China business newspaper: "issuing bonds is a very common means of financing. BAT has all issued bonds, and Ali has issued 8 billion dollars of bonds. Jingdong issued relatively few bonds."

According to it, when a company achieves certain scale and gets certain recognition in the market, it will establish certain credit, and then can issue bonds at a certain interest rate level and replenish funds. This is a normal behavior. There is no such thing as issuing bonds without money.

Moreover, the cost of financing in this way is not high. Why can it be melted?

In AI media consulting CEO Zhang Yi, there is some truth in this statement. The $1 billion bond can be issued, or Jingdong has certain capabilities.

He pointed out that generally speaking, the financing channels of enterprises can be divided into three types: issuing stocks, issuing bonds, lending to banks, and bonds are relatively the best way, because issuing shares will dilute equity, which may not be a good thing; lending to banks, the interest rate in the middle is high, and there are still many cumbersome procedures, which may not be able to lend.

For Jingdong, issuing bonds is a good financing channel.

"But why Jingdong issue bonds is a real problem.

For enterprises, issuing bonds will have an impact on stock prices, which may not be a good choice, but we must go this way, indicating that Jingdong still has some pressure on capital. "

Zhang Yi said.

On the two day after the Jingdong announced the issuance of bonds, the shares of Jingdong fell by 3.07% and 8.6% respectively, and the market value of the two trading days evaporated by 4 billion 400 million US dollars and nearly 30 billion yuan.

Previously, the Jingdong public relations department told reporters that "as of the end of 2015, Jingdong's current assets amounted to 58 billion yuan, so there is absolutely no concern about tight funds."

From the earnings report, the current assets of the 58 billion yuan have both cash flow and inventory. They are both part of current assets and accounts receivable.

The above said: "in the retail industry, finance has such characteristics, first of all, cash flow is abundant. Secondly, liquid assets can be quickly realized, such as inventory, Jingdong inventory has 20 billion yuan of goods, and accounts receivable, Jingdong has IOUs.

Of course, the retail industry is bound to have suppliers' accounts payable, but this has nothing to do with the tension of the capital chain. "

However, Zhang Yi believes that current assets are not very clear, because theoretically accounts receivable means accounts payable.

"Jingdong is a fast moving capital enterprise. When the left hand comes in, the right hand will go out immediately. For such an enterprise, if there is no money to settle on the account, if there is a problem, such as a slow payment, a sudden competition of competitors, it is basically not profitable.

For example, 8848 of the year was a very valuable business, which was due to the shortage of cash flow reserves.

Zhang Yi said.

As we all know, the traditional strength of Jingdong mall is 3C category. Sales account for about 60%, which is the main source of revenue for Jingdong.

However, since the beginning of this year, its competitors Ali and Suning have jointly invaded the field.

In April 7th this year, Ali and Suning announced "joint training" to open up channels such as logistics and services.

Suning's advantage under the line has made up for the shortage of the logistics of Ali, and Ali's traffic has also supported the online expansion of Suning. The two sides have a clear intention to attack Jingdong's watchdog category 3C digital home appliances under the mode of merging online and offline.

According to the details of "joint training" announced by Ali and Suning, since April 9th, apart from promotions, consumers who buy mobile phones, digital and home appliances in Tmall can enjoy various services provided by sunning's latest stores and warehouses, including quick flow distribution, home appliances door-to-door replacement, free door-to-door installation, 3C digital product repair and after-sales service.

On the contrary, Jingdong began to expand the category expansion as an important strategic goal very early. It hopes that the growth of revenue can be realized by expanding its commercial boundaries.

Analysys analyst Wang Xiaoxing believes that Jingdong mall has been the main category of 3C, its sales account for about 60%, but 3C category prices are more pparent, low gross profit, Jingdong mall losses and excessive dependence on 3C category has a certain relationship.

There is no doubt that the direction of Jingdong's development is right, but the key lies in the "war situation" of other categories.

Give such data: in addition to the high growth of 3C products, consumer goods,

Sales of other categories were equally significant.

The total core pactions of electronic and household appliances in 2015 were 228 billion 900 million yuan, an increase of 65% over 2014. The total core pactions of commodities and other commodities in 2015 were 217 billion 600 million yuan, an increase of 109% over 2014.

Compared with 42.8% in 2014, the total core paction volume of commodities and other commodities in 2015 increased to 48.7%.

At this year's Jingdong annual meeting, Jingdong group CEO Liu Qiangdong has clarified the three major directions of Jingdong's future development. It will focus on three major areas, namely, electricity supplier, finance and technology.

However, from the present point of view, Jingdong financial and Jingdong's two projects are still consuming funds.

Jingdong finance can be copied from the Jingdong group "smashing the layout of money" routine.

In order to launch business lines and increase business volume as soon as possible, Jingdong finance has expanded its business at low cost or even free, which has also reduced the risk threshold to a certain extent.

According to media reports, in the first three quarters of 2015, Jingdong's financial revenue was 1 billion 258 million yuan, but it lost 677 million yuan and a net loss of 53.8%.

However, this year, the overall market environment is not so satisfactory.

With the trend of cooling down, many P2P companies are on the run and the chips are not as hot as they used to be.

Insiders pointed out that even some Internet banking advertisements are not allowed to fight.

Jingdong said, "Jingdong finance is not the so-called Internet financial company. We are positioned as a financial technology company.

Since its inception, it has chosen data technology as its core competitiveness, and through its own accumulation and extensive strategic deployment abroad, we have acquired the ability to acquire data sources of various dimensions, and have the ability to analyze, process and apply these data.

On the other hand, Jingdong has invested in several companies, including Yonghui supermarket (8.460, -0.27, -3.09%), daily orchard and hungry.

In August 7, 2015, Jingdong announced its strategic cooperation with Yonghui supermarket and invested 4 billion 310 million yuan in the price of 9 yuan per share to acquire 10% of the latter.

However, in addition to the theme of "fresh home" held on the eve of the "Twelfth two year" last year, almost no more cooperation was launched.

In the industry's view, for Jingdong, it is not difficult to achieve profitability, but the problem is that to stop losses and increase revenue, we must lose the pace of development, and the faster the development speed, the more we lose, and also increase the risk. This is the dilemma that Jingdong is facing now.

Now, how much more can the $1 billion corporate bond "blood pfusion" bring to Jingdong? It remains to be seen.