SF is a fast delivery giant, but more strings likely to be added to its bow

The financing business SF founder Wang Wei controls was spun off ahead of its IPO and has huge growth potential, industry analysts say

PUBLISHED : Friday, 03 March, 2017, 4:43pm
UPDATED : Friday, 03 March, 2017, 10:07pm

SF is already enjoying being dubbed as China’s Fedex, while analysts note besides its core business in fast delivery, it has plenty of potential to expand to the lucrative financial service business, by leveraging its vast client base and their credit information.

In fact, Wang Wei, founder of SF Holdings, spun off the financing business from the group company last August, before the company went public in Shenzhen last Friday.

Zhao Xiaomin, an angel investor and independent researcher in China’s logistics sector, said the company’s financial affiliate has huge potential to tap as its financial services could eventually encompass online payment, financing, wealth management, investment fund and leasing.

“The SF brand has struck a chord with millions of clients and they will believe in its financial services,” he said. “It may not be able to eventually secure a banking licence, but the scale of its financial services offered to vendors and clients could be large.”

Zhao added SF’s move to separate its finance business from the listed assets was a sign that it intended to launch a floating of the independent unit in future.

After going public, the company must be loaded with cash, which could in turn help it quickly ramp up the financing business through strategic acquisitions
Spencer Li, vice president of products, Fincera

According to disclosure filed by SF Holdings last August, the group company’s financing business already includes small loans, factoring (trading of receivables), financial leasing, and online payments.

Bloomberg valued the finance business that Wang controls at US$109 million.

That’s tiny compared to its listed business, SF Holdings now valued at 262 billion yuan (US$38 billion), at Friday’s close, its shares falling back another 7.8 per cent to 62.60 yuan. But still biggest market capitalisation on the Shenzhen exchange, which has proved a magnet for technology listings.

Spencer Li, vice president of products at Fincera, a mainland based financial services company, said SF’s financial business had great potential, given its access to large amounts of existing customer data.

“The third party payment license it owns is already a precious resource, as the government has essentially frozen new approvals.

“After going public, the company must be loaded with cash, which could in turn help it quickly ramp up the financing business through strategic acquisitions,” he said.

Based on its closing price of 62.60 yuan on Friday, SF Holding’s price-to-earnings multiple reached 70, compared to the average p-e ratio of 42.4 on the shenzhen stock exchange.

That compares with a multiple of 40 for its Chinese competitor YTO, 35 for Yunda, 28 for STO and 13 for ZTO, whose stock has dropped 34 per cent since its US debut in October.

FedEx Corp is trading at around 15 times of its earnings.

Analysts say SF had got a leg up on its rivals in terms of management systems and use of the latest information technologies.

Nonetheless, the company’s market capitalisation of 262 billion yuan at Friday’s close was seen as bubbly with market watchers contending that 200 billion yuan would be a reasonable and fair valuation for SF.