002352.SHE
SF eyes Hong Kong IPO en route to joining global logistics big leagues

The world’s fourth-largest integrated logistics company has applied to list in Hong Kong, complementing its existing listing on China’s domestic A-share market

Key Takeaways:

  • SF Holding has applied to list in Hong Kong, aiming to use the city as a financing springboard for its global expansion
  • The Chinese logistics giant’s profit rose 32% last year to 8.2 billion yuan 

By Lau Chi Hang

In China, telling someone you’re “SF-ing” them” has become synonymous for sending them a package, even for people not using leading delivery service operator S.F. Holding Co. Ltd. (002352.SZ). The company is arguably the best-run integrated logistics service provider in China. Now, it’s hoping to replicate that success globally, reflected by its recent filing for a Hong Kong listing to tap the international capital market.

SF founder Wang Wei is legendary in China for a rags-to-riches story that saw him rise from origins as a goods smuggler to head of a company worth more than $20 billion. The son of highly educated parents, Wang moved to Hong Kong from Shanghai in the mid-1970s. When his parents were unable to find good jobs and struggled to make ends meet, Wang abandoned his studies after middle school and started working.

Despite his lack of education and family support, he set up SF across the border in the city of Shunde in Guangdong province in 1993, well before China’s e-commerce explosion, in an era when delivery services were still dominated by the national post office. He launched his first Hong Kong branch in a run-down store on Portland Street in the city’s working-class Kowloon district. 

As Hong Kong businessmen began flocking across the border to Guangdong’s Pearl River Delta to set up factories, demand for sending documents and goods between Hong Kong and China grew rapidly. That demand got a huge shot in the arm with China’s e-commerce explosion that began in the early 2000s with the rise of names like Alibaba.

Fast forward to the present, where Wang’s diligence and China’s economic takeoff have transformed SF from a six-person operation to a multinational with 103 aircraft and 200,000 vehicles, making it a dominant presence in Asia’s logistics market.

Growing revenue, profits

According to its listing document, SF’s revenue grew from 207.2 billion yuan ($28.4 billion) in 2021 to 258.4 billion yuan in 2023, representing average annual growth of 11.7%. Its profit over that period rose from 4.7 billion yuan to 8.2 billion yuan, growing by an even faster annual rate of 31.9%. According to third-party data in the listing document, SF was China’s and Asia’s largest integrated logistics service last year by revenue, and the fourth largest globally.

Now, having conquered China and Asia, SF wants to take on the world. “Looking ahead, we aim to become the leader in global logistics and connect Asia with the world,” it said in its listing document.

Tailor-made country strategies 

During the Yuan Dynasty founded by legendary Mongol Genghis Khan in the 13th century, iron-fisted Mongolian horsemen swept across Europe and Asia, though their empire was quickly erased just a century later due to poor governance. SF is hoping not to repeat that experience by using its years of knowhow in logistics and technology, along with its acquired talent, in a sort of modern-day march towards markets in Europe and the U.S. 

The company has laid out a complete set of strategies aimed at helping it break into Western markets. In the West, it said, it’s aiming to leveraging its well-known brand, strong cost efficiency and integrated capabilities to provide one-stop services to global customers.

SF also understands overseas markets come in many shapes and sizes. Accordingly, it is adopting an approach of customizing its strategy in each country, seeking entry points based on local business practices. In addition to leveraging its own strengths, the company also plans to seek external partnerships to quickly build up its local competitiveness. Internally, it will use hybrid teams combining talents from its home base with overseas-based employees most familiar with local market conditions.

Such global reach obviously requires big spending, which SF hopes to finance partly with assistance from the global capital market. “SF’s main purpose is to expand rapidly through the power of capital globalization,” said Wang. “SF aims to follow down the same path as many giants that gained scale through rapid expansion.” In that context, the Hong Kong listing can be seen as Wang’s first step toward realizing his global dream.

Riding Chinese companies’ global expansion

Asia has some of the best growth prospects in the global logistics market, with intra-regional spending worth $5.1 trillion last year, accounting for 45.5% of the global total, and expected to grow 5.5% annually between 2023 and 2028, according to the listing document. As the leading player in Asia, SF is poised to benefit from Asia’s dominant position in the global logistics market.

What’s more, additional demand should come from big Chinese companies as they look overseas for more growth opportunities in a wide range of industries like e-commerce, photovoltaics, new energy vehicles and pharmaceuticals. Chinese logistics companies like SF are natural partners for such global expansions, with their strong presence in China and greater awareness of the needs of Chinese companies.

Global logistics leaders UPS (UPS.US) and FedEx (FDX.US), with which SF hopes to someday compete, both currently trade at price-to-earnings (P/E) ratios of 17 times. Given its position as the world’s fourth largest player, a presumed P/E ratio of 15 for SF would give it a market value of up to HK$130 billion ($16.7 billion). That’s about a quarter less than the company’s valuation based on its Shenzhen-listed A-shares, reflecting higher valuations often given to companies by Chinese investors compared with their global peers. 

Regardless of which valuation it gets, the company still has a way to go to catch UPS and FedEx, at least in terms of market value, as that pair are currently worth $115 billion and $73 billion, respectively. But anything could be possible over the longer term in the ultra- competitive and fast evolving global logistics market.

Wang Wei once said “I don’t really believe things happen by accident. Why would things happen accidentally? That can only occur due to ignorance.” To the contrary, everything he does is well thought out: “When all cause-and-effect relationships are brought together and you can make comparisons, you will know what’s needed,” he said. “What we want to do now is utilize our good platform at SF to turn things that may look accidental in the future into what was meant to be.”

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