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Vipshop (VIPS) Enters into a Term Loan Facility Agreement

Zacks Equity Research

Vipshop Holdings Limited VIPS has entered into a term loan facility agreement that will help it finance the repurchase of Senior Notes issued by the company.

The financers of the term loan are Credit Suisse AG, Singapore Branch and Morgan Stanley Senior Funding, Inc. However, as per the agreement, the money can be utilized in connection with repurchase of 1.50% Convertible Senior Notes due 2019.

The maximum amount that Vipshop may utilize from the term loan amounts to $632 million comprising of actual amount of the repurchase price for the 1.5% senior notes plus fees, costs and expenses. The minimum amount that the company may utilize is $5 million.

In Feb 2017, Vipshop had extended the put right offer relating to 1.50% Convertible Senior Notes due 2019 until Mar 15, 2017. The withdrawal of the put right with respect to the senior notes was also extended till Mar 14, 2017.

If we look at the current liquidity condition of the company we find that as of Dec 31, 2016, Vipshop had cash and cash equivalents of $591.9 million compared with $740.6 million as of Sep 30, 2016.

The company’s held-to-maturity securities amounted to $96.8 million as of Dec 31, 2016 compared with $10.7 million held in the previous quarter.

Overall, the company has been delivering improved top-line results since the past few quarters despite a difficult macro-economic environment. The addition of new customers as well as younger and more Internet and mobile-savvy shoppers to customer base has fueled revenues.

Vipshop Holdings now anticipates targeting expanding demographics and offer products tailored for shoppers of various age groups. Moreover, the company will focus on delivering more personalized products and services to customers.

However, the discounts offered by the company are expected to adversely impact margins. Further, the ongoing macroeconomic slowdown in China and increasing competition in the retail space remain concerns.

The share price of the company has shown a promising gain of 9% in the past three months, outperforming the Zacks categorized Internet Services-Delivery industry which witnessed an increase of 4% during the same period.

Zacks Rank & Key Picks

Vipshop currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the computer technology sector include Aspen Technology Inc. AZPN, Canon, Inc. CAJ and EXFO Inc. EXFO. While Canon sports a Zacks Rank #1 (Strong Buy), Aspen Technology ans EXFO carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While Aspen Technology has an expected earnings growth rate of 13%, Canon has earnings growth rate of 3%. EXFO has average earnings surprise of 23.8% in the trailing four quarters.

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