appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

appConfig

filter

json

liveArticle

SCMP Reporter

After successful stock market debut of logistics arm IDS, the group sees a retail flotation as good for expansion in China

Li & Fung group is considering  listing Toys 'R' Us Asia and other retail operations, after the spin-off of its logistics company Integrated Distribution Services (IDS) Group which debuted on the main board yesterday.

Toys 'R' Us Asia and other units are still privately held and could be spun off, said group managing director William Fung Kwok-lun.

'It is our [intention] to spin off the units to attract quality management personnel, [while] investors can invest in companies with focused operations,' Mr Fung said.

Toys 'R' Us Asia, which holds the regional toy franchise outside Japan, is a joint venture between American global retailer Toys 'R' Us and Li & Fung (Retailing).

The US firm has recently  expressed interest in finding potential buyers for its stake in the Asia franchise. Li & Fung has made clear it would like to take full control.

'We have informed them of our interest in the franchise, if Toys 'R' Us really wants to sell  it,'  Mr Fung said.

He said separate listings of  Li & Fung's  distribution and retailing units could  facilitate the group's expansion into China.

IDS, the latest  spin-off  from Li & Fung,  is planning to beef up its logistics and distribution operations  in the mainland, said IDS group managing director Ben Chang.

It is among the first foreign distribution companies granted approval from China's Ministry of Commerce to set up a wholly owned subsidiary to conduct distribution and import-export businesses  under the Closer Economic Partnership Agreement.

IDS, which  raised HK$420 million in its IPO,  was warmly received by  investors on its first day of trading yesterday, with 103.05 million shares changing hands.

The share price had touched an intraday high of $4.60 before settling at the closing price of $4.35, a gain of 24.28 per cent against the IPO price of $3.50,

'There is more buying from institutional investors than profit-taking from retail investors,' a  broker said.

'Some funds are snapping up the shares.'

He said HSBC, sponsor of the IDS listing, was a key buyer.

'I think HSBC  is buying for its clients,  rather than trying to support the share price,' he said.

Some fund managers complained about the light share allocations to institutional investors  amid the overwhelming response to the  offering.

The retail tranche  was about 152 times covered, while a source said the placing tranche was about 30 times subscribed.

The strong response from retail investors  triggered a clawback mechanism, leading to a reduction of the placing tranche from 90 per cent to 50 per cent.

Buyers cited the company's solid management team and the prospects for growth in the logistics and marketing sectors in China.

One fund manager projected operating profit at IDS to grow by 25 per cent over the next two to three years.

'IDS has focused on restructuring and streamlining its core businesses in the past few years and it's now ready to focus its top-line growth,' the fund manager said.

The company posted net profit of US$6.6 million on total revenues of US$269.4 million for the first six months this year.

Last year, it recorded net profit of US$8.4 million on revenues of US$591.8 million.



Hong Kong set to be ousted by Nasdaq as the world’s biggest IPO market – but still top 3

Why is Chinese DRAM maker CXMT’s IPO attracting so much attention?

China’s Top Numerical Control rides investor fervour for aerospace to 80% IPO gain

Quantum IPO wave is a milestone. It should also come with a warning

Li & Fung considers spin-off for toy unit