On the evening of August 1, SF Express confirmed its intention to list in Hong Kong.
The announcement highlighted that the independent directors of SF Express Holdings Co., Ltd. (hereafter referred to as "SF Express") have agreed to the issuance of H shares and listing on the Hong Kong Stock Exchange. The company plans to complete this within the effective period of the resolution of the shareholders' meeting (that is, 18 months from the date of approval by the shareholders' meeting or other agreed extension). This suggests that SF Express could potentially be listed within 18 months.
Rumors about SF Express's listing in Hong Kong had been circulating even before the official confirmation. On the evening of July 7th, SF Express Holdings announced that the company was investigating equity financing in the Hong Kong capital market and conducting preliminary work such as research consultation and discussion.
If successful in its Hong Kong IPO, SF Express will become the first express industry company to hold both "A+H" shares, strengthening its international market reach and business capabilities. SF Express noted in its announcement that listing in Hong Kong would support its internationalization strategy, create an international capital operation platform, enhance its global brand image, and improve its overall competitiveness.
Building a comprehensive financing layout
SF Express, founded in 1993, has grown over 30 years and was listed on A-shares in 2017. If it successfully lists in Hong Kong, SF Express will become the first express delivery industry company to hold "A+H" shares. This will allow it to fully utilize the advantages of both international and domestic capital markets, construct dual financing platforms, and broaden its financing channels and methods.
Regarding the size of the issuance, the announcement from SF Express reveals that the number of H shares to be issued this time will not exceed 10% of the company's total share capital after the issuance (before the exercise of the over-allotment right). It also grants the overall coordinator an over-allotment right of up to 15% of the aforementioned H shares issued. The final number and proportion of shares issued will be determined by the shareholders' meeting, board of directors, and those authorized by the board of directors in accordance with legal regulations, regulatory approvals or filings, and market conditions.
Some analysts believe that diversifying financing channels can help international investors better understand mainland companies and enhance their international reputation and prestige. It can also attract international strategic investors and promote the company's foray into international markets. Express logistics expert and CEO of Guanshu Capital, Zhao Xiaomin, commented that Hong Kong, being an international financial center, can garner global attention and further promote SF Express's internationalization and globalization. "The 'A+H' model is a sign that a company is looking at a long-term layout," Zhao said.
Currently, SF Group has four listed companies under its umbrella: SF Holdings, SF Same City, SF Fung Property, and Kerry Logistics. The latter three have already listed in Hong Kong. SF is further improving its capital market layout. SF Same City previously submitted an application for full circulation of H shares to the China Securities Regulatory Commission, and later the Hong Kong Stock Exchange approved the listing of 451,403,783 H shares of SF Same City. According to SF's announcement, these shares were listed on the Hong Kong Stock Exchange starting at 9 am on July 31, 2023.
Kerry Logistics announced on July 25 that it planned to sell several of its express service subsidiaries in the Asia-Pacific region and Europe to SF Holdings for HK$250 million. Prior to this, SF expanded its international market layout through the acquisition of Kerry Logistics. However, the performance of the supply chain and international business that SF Holdings gained advantages from through the acquisition of Kerry Logistics was not very promising in the first half of this year. The SF Holdings' June express logistics business operation brief showed that the revenue of SF Holdings' express logistics in June was RMB 16.704 billion, an increase of 7.85% year-on-year, while the revenue of its supply chain and international business decreased by 51.66% to RMB 5.108 billion. This marked the ninth consecutive month of year-on-year decline for SF's supply chain and international business, which was almost half of its highest monthly income.
In terms of market value, SF currently has a market value of more than RMB 240 billion, far ahead of other domestic express logistics companies listed, but still lagging behind international express logistics companies such as UPS, DHL, and FedEx.
In terms of performance, SF Express continues to lead in profitability. The company's recently released 2023 semi-annual performance forecast shows that the net profit attributable to shareholders of the listed company for the first half of this year is expected to be between RMB 4.02 billion and RMB 4.22 billion, a year-on-year increase of 60%-68%. The non-net profit is expected to be between RMB 3.54 billion and RMB 3.74 billion, a year-on-year increase of 65%-74%.
Capital reserve needed for expansion
At present, the express logistics industry has entered a high-quality development stage, and simply increasing business volume is no longer sufficient to boost competitiveness and profitability. Changes and subsequent developments also require more financial support.
SF Express has outlined several strategic adjustments this year, including the significant move to slow down the pursuit of the e-commerce market, selling Fengwang to Jitu, and purchasing 1.54% of Jitu's shares.
On the business side, SF Express has successfully stepped away from the low-cost e-commerce package trap, quickly recovering the share of time-sensitive items. In terms of new business, SF Express's cold chain and express service have made a name for themselves in their respective fields. On July 7th, SF Same City also announced that it is expected to become profitable in the first half of 2023, marking it as the first company to achieve profitability in the instant logistics field. Furthermore, according to data released by SF Airlines on June 21, the SF Airlines fleet has reached 83 aircraft, far more than JD Airlines and China Post Airlines. The development potential of the E'zhou Huahu Airport, which SF has invested in building, is yet to be tapped.
The advantage that SF Express has built is an important precondition for its first escape from the price war quagmire. At the same time, SF Express is also striving to narrow the gap with UPS, DHL, FedEx in the international market, enhancing its global value, profit, business scale, and other development spaces. In the future, SF will inevitably need the support of the capital market.
Zhao Xiaomin told Interface News that the peak of SF Express's capital expenditures has passed, but its capital reserves can still help it maneuver in the international market, including being able to make timely investments when investment targets are available. "Compared to A-shares, H-share listed companies can more conveniently carry out mergers and acquisitions, can exchange shares domestically and abroad, and have no mandatory performance commitments," said Zhao.
Meanwhile, Cainiao and Jitu are also planning to go public in Hong Kong. In Zhao's view, if express companies have the opportunity to go public in the current market atmosphere, it means the market is still in the expansion phase, which would complement their strength.
