SF Holdings Adds CICC, UBS to Banker Team for $3B Hong Kong IPO

China International Capital Corporation and UBS have been tapped by SF Holdings as overall coordinators and financial advisors to handle what is expected to be Hong Kong’s biggest initial public offering this year.

The two investment banks will be joining joint sponsors and overall coordinators Goldman Sachs (Asia), Huatai Financial Holdings (Hong Kong), and JP Morgan Securities (Asia Pacific) to form the courier giant’s syndicate for the equity sale, according to a filing with the exchange on 4 September.

Ranked as the largest integrated logistics provider in Asia and the fourth biggest globally in a study by Frost and Sullivan, the listing would be the second for SF Holdings, which is already listed on the Shenzhen exchange, and could raise up to $3 billion, according to sources familiar with the share sale cited in a Reuters report earlier this year.

“We have dedicated 30 years to building our logistics network and investing in logistics infrastructure, which has given us a unique position today in Asia as an industry-defining player,” SF Holdings wrote in its draft prospectus. The company added that, “We strive to become the go-to logistics partner of businesses and individuals worldwide, offering market-leading logistics services that empower their success,”

Global Expansion Plan

Citing Frost & Sullivan, the company said it delivered 11.1 billion parcels in 2022, more than an unnamed North America-based competitor which carried 6.2 billion items. That number coincides with the reported delivery volume of top US player FedEx last year. However, the majority of its manpower is still based in China.

While SF has been expanding overseas, primarily through partnerships, about 118,203 or 76.6 percent of its 154,413 employees are in China, while another 21.8 percent work in other Asian locations.

The company did not give specific numbers on how it would be spending its proceeds, but a portion of the cash will be used to upgrade its Asia network, specifically in Southeast Asia. In October 2021, SF Holdings acquired a 51.8 percent stake in Hong Kong-based Kerry Logistics for HK$17.6 billion ($2.3 billion) to expand its presence beyond China and create the largest express delivery provider in the region.

The company said further mergers and acquisitions are planned, although it did not specify any targets.

Profit Jump

Founded in Shunde, Guangdong province in 1993, for 2022 SF Holdings logged just over RMB 7 billion in profit after tax, which was a 38 percent increase over the RMB 4.4 billion it achieved a year earlier. That profit bump came at the same time that revenues rose to RMB 267.5 billion last year from RMB 207.2 billion in 2021.

The company’s lists 470 of China’s 500 largest enterprises as its clients and is known for being the primary carrier for packages delivered on behalf of China’s RMB 44 trillion e-commerce industry. The company is also the sponsor of Hong Kong-listed SF REIT, which now holds several of the warehouse properties used by SF Express.

In a commentary published on 3 August, Fitch Ratings noted that if SF Holdings were to proceed with a secondary listing through the Hong Kong stock exchange, the company’s financial profile would be “strengthened” as this would improve its earnings and offer an opportunity for organic growth as it expands operations overseas.

“SF’s business profile has remained strong as it is China’s leading express-delivery service company, while the company has expanded organically into non-express delivery businesses and made acquisitions, like the purchase of Kerry Logistics Network in September 2021. Its business diversification has improved, with 51 percent of revenue from non-express delivery businesses in 2022 compared with less than 30 percent before 2020,” Fitch said in the note.