Kerry Logistics sets high aim for valuation in IPO
Several investment banks shortlisted as the firm aims to tap the mainland's consumption growth
Kerry Logistics Network, the logistics arm of Kerry Properties, aims to list in Hong Kong in the fourth quarter with a valuation that will top its peers already trading on the bourse.
Kerry Properties has shortlisted a handful of investment banks including Citigroup, BOC International and HSBC and will finalise the sponsors soon, according to people familiar with the situation.
Although Hong Kong is an international logistics hub only a few industry players are listed in the city. The valuations of those that are listed, including Sinotrans and ASR, range between six and 7.7 times earnings, much lower than that of international competitors.
FedEx, which is listed in New York, is priced at about 15 times its projected earnings while United Parcel Service is at 19 times.
"Kerry Logistics could be worth much more than its peers in Hong Kong but it's too early to talk about its pricing or the size of its initial public offering now," one of the people said.
The company's net profit, stripping out a paper gain from property revaluations, topped HK$815 million last year on HK$19.3 billion in sales. Earnings amounted to HK$1.07 billion if the one-off gain was included.
For fund managers, the market capitalisation of Kerry Logistics may not be sizeable enough to warrant investing in if the company cannot be priced at 10 times historical earnings.
"Institutional investors will only be interested in the company with a free float of not less than US$300 million," an analyst said.
Kerry Logistics aims to cash in on the increase in the mainland's domestic consumption as Beijing compensates for the slowdown in export growth.
About 27 per cent of the 30 million square feet of logistics space operated by the company is on the mainland. To capture sector-driven growth, it has expanded its automotive parts distribution centre in Kunshan. The 360,000 sqft centre will open next year.
Kerry Properties is part of the Kerry Group, which controls the company that publishes the South China Morning Post.