Transport and logistics

SF Express raises US$1.2b to buy airplanes and boost technologies

The funds are raised through a share placement with eight institutions including Guotai Junan and Penghua Fund Management

PUBLISHED : Wednesday, 23 August, 2017, 2:43pm
UPDATED : Wednesday, 23 August, 2017, 11:03pm

SF Express, one of China’s largest logistics service providers, has raised 8 billion yuan (US$1.2 billion) through a share placement amid its plan to expand the fleet of air carriers and bolster international businesses.

The company controlled by billionaire Wang Wei sold 227 million shares to 8 institutional investors at 35.19 yuan apiece, it said in a filing to the Shenzhen Stock Exchange.

The offering price represented an estimated 32 per cent discount to its closing price of 51.94 yuan on Monday.

“The fundraising was part of SF’s strategy of becoming a global player and a technology-driven logistics business,” said Zhao Xiaomin, an angel investor and independent researcher in China’s logistics sector.

“SF is likely to raise more funds via equity financing or debt sales to better tap the booming e-commerce business.”

SF, along with its domestic rivals YTO Express, STO Express and Yunda Express completed their backdoor listings on the A-share market over the past year, as they revved up expansions to meetincreasing express delivery demand arising from the e-commerce businesses.

ZTO Express was the only one of the top five mainland express firms that conducted an initial public offering (IPO) in New York.

Backdoor listing enables companies to raise funds through refinancing such as private share placements.

The fundraising was part of SF’s strategy of becoming a global player and a technology-driven logistics business
Zhao Xiaomin, angel investor

SF said the proceeds, raised from institutions such as Guotai Junan Securities and Penghua Fund Management, would be invested in aviation materials, transport equipment and technologies to enhance its refrigerated and cargo handling capabilities.

It will spend 2.7 billion yuan to buy airplanes and recruit pilots.

In May, SF Holdings, parent of SF Express, announced that it will set up a joint venture with US-based United Parcel Service to explore soaring cargo flows between the mainland and the Western markets.

China’s fast-growing cross-border online shopping has ushered in rising demand for international courier services as a growing number of mainland consumers splurge on foreign-made goods, especially in categories like cosmetics and personal care, baby food, health care and consumer electronics.

China’s SF Express eyes home-grown technology as means to expand globally

According to AliResearch, the think tank affiliated with Alibaba Group, the cross-border e-commerce market on the mainland is expected to hit 12 trillion yuan by 2020.

Alibaba is the owner of the South China Morning Post.

“For logistics businesses, it is important to have a vast network of operations and leading technologies so as to stay ahead of competition,” said Xiong Hao, assistant general manager at Shanghai Jump International Shipping. “The increasing use of latest technologies such as artificial intelligence can effectively help delivery firms slash labour and management costs.”

David Adams, chief executive of the international business unit of SF, told the Post earlier this year that China already had tremendous technologies that could be better used to expand the company’s businesses.

Shenzhen-based SF has started commercial drone deliveries after receiving the first drone airspace license in the mainland.