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<Research>UBS: Hastening Share Buyback by JD.com (JD.US) Unlocks Value
Recommend 12 Positive 27 Negative 6 |
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JD.com (JD.US) disclosed last night (18 Apr) that it repurchased a total of US$1.2 billion of shares in 1Q24, equivalent to about 2.8% of the total number of ordinary shares outstanding at the end of December last year, far exceeding expectations, UBS highlighted in a report. On an annualised basis, this represented a yield of about 12%. JD has executed a total of US$2.1 billion of buybacks under its buyback programme from March 2021 to March 2023, with US$500 million in repurchases conducted under the new programme. Although the pace of buybacks may change in the future, the broker expected these buybacks to be sustainable given JD's strong cash position and free cash flow. The group's valuation multiples have been under pressure over the past few years despite its strong cash position (around 50-60% of market capitalisation) and consistently higher-than-expected gross margins, which the broker believed may be due to the low returns to shareholders in the past and investors not placing too much weight on its cash balance. However, the group's announcement yesterday should send a strong message and commitment to the market, thereby unlocking the value of the shares. In addition, UBS believed this is a year of execution for JD, with user investment and merchant ecosystem remaining a key focus. Given the group's strong free cash flow, which could be US$7 billion by FY24 according to the broker's forecast, there is room for accelerated buybacks and upside in shareholder returns. UBS assigned a Buy rating to JD's US shares, with a target price of US$37. AAStocks Financial News |
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