China South City seeks acquisition to boost its supply chain division
The company is meeting investors in Hong Kong and Singapore as a precursor to a bond issue
Anita Lam and Jasper Moiseiwitsch
China South City, the developer of huge integrated trade centres operating in seven mainland cities, is looking for acquisition opportunities for its supply chain division such as freight forwarding, joining a growing number of players seeking a slice of China's booming logistics market.
Retail giants, traders, e-commerce platforms and airlines are all rushing to build their own freight forwarding teams and warehouse facilities amid booming demand and favourable policies as the government tries to bring down logistics costs.
"We are targeting tier-two and tier-three cities because their trade centres are relatively old and backward and their logistics and delivery facilities are also relatively underdeveloped. This is where we can bring in our expertise," Stephen Fung, the group's chief financial officer, said. "We seek to bring in one to two projects every one to two years."
According to a term sheet seen by the South China Morning Post, the group has mandated UBS, Citi, HSBC, Bank of America Merrill Lynch, Credit Suisse and ICBC International to arrange investor meetings in Singapore and Hong Kong from tomorrow as a precursor to a bond issue.
The developer has been replicating its one-stop wholesale shopping services in Shenzhen in other cities such as Zhengzhou, Nanning, Heyuan and Harbin, adding warehousing, transport and product diversity to the traditional trade-centre model.
With local consumption and online trades picking up, China South City's contracted sales more than tripled to HK$5.8 billion in the first half of this year, factoring in new sales contracts it has signed but not yet booked. It met 90 per cent of its annual sales target of HK$11 billion.
But the group's gross profit margin edged down 2 percentage points to 52 per cent during the period amid price competition from older trade centres.
Fung said the group, being new, usually offers lower leasing prices but these will gradually rise.