SF Express delivers 10pc rise in share price on trading debut in Shenzhen under new identity

SF says it expects to report 57.5 billion yuan of sales for 2016, up 19.5pc from a year earlier. Profits for last year were expected to jump 280pc to 4.2bn yuan

PUBLISHED : Friday, 24 February, 2017, 12:08pm
UPDATED : Friday, 24 February, 2017, 10:59pm

Shares in SF Express, mainland China’s largest express delivery company, soared by their daily 10 per cent limit in Shenzhen on Friday when they traded for the first time after taking over and renaming a rare earth trader.

The stock, under its previous name of Maanshan Dingtai Rare Earth & New Material Co, had jumped for the fourth day this week, then on Friday surged 10 per cent under its new identity to a 17-week high of 55.21 yuan (HK$62.33) on the Shenzhen exchange.

The company’s capitalisation was valued at 231 billion yuan (US$33.4 billion) based on the closing price Friday.

Wang Wei, chairman and founder of SF, who holds about 65 per cent of the firm, saw his personal net worth swell to nearly 150 billion yuan.

“It was no surprise because the investing public was convinced of its earnings and growth potential,” said He Yan, a hedge fund manager with Shanghai Shiva Investment. “The delivery service sector is still a market where fierce competition will continue.”

SF engineered a backdoor listing via buying out Maanshan before injecting its assets into the listed vehicle.

It was the fourth major delivery company in China to get a listing status on the mainland through reverse merger deals.

It was no surprise because the investing public was convinced of its earnings and growth potential. The delivery service sector is still a market where fierce competition will continue
He Yan, a hedge fund manager with Shanghai Shiva Investment

ZTO Express, one of the top five mainland delivery firms, conducted an initial public offering in New York last October.

SF said in a filing that it was expected to report 57.5 billion yuan of sales for 2016, up 19.5 per cent from a year earlier. Profits for last year were expected to jump 280 per cent to 4.2 billion yuan.

China’s strong e-commerce business has been driving demand for delivery services in the past decade.

According to internet consultancy iResearch, 60 billion parcel deliveries will be needed to be handled in China by 2020, from 20.7 billion in 2015.

The top five privately-owned delivery firms took the lion’s share of the business, handing a combined 18.5 billion deliveries last year.

But they are also facing narrower profit margins and a labour shortage amid the fast-growing businesses.

Average prices dropped from 28.5 yuan per delivery in 2007 to 13.4 yuan last year.

After the Chinese New Year in early February, mainland media reported that a large number of parcels were undelivered at some firms due to lack of workers.

Labourers were increasingly complaining about being underpaid, according to Henan Business Daily.

“More consolidation in the delivery sector will take place in the coming years as cutthroat competition will force out small players,” said Zhao Xiaomin, an angel investor and independent researcher in China’s logistics sector. “Leading companies are supposed to use sophisticated technology and facilities to turn the industry into a technology-intensive, rather than labour-intensive one.”

China’s big five parcel delivery companies seek to raise funds ahead of consolidation wave

Mainland China has more than 8 million logistics firms, 90 per cent of which are small-scale or individually owned. Analysts believe millions of the small express firms won’t survive cut-throat competition in coming years as larger rivals enhance their efficiency and expand their geographic coverage.

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