SF Holding IPO analysis and subscription plan
SF Holding Co., Ltd. (hereinafter referred to as "SF") is a globally leading comprehensive logistics service provider, with businesses covering express delivery, freight transportation, cold chain logistics, intra-city instant delivery, supply chain, and international operations. With its robust logistics network, advanced technology, and high-quality services, SF is committed to providing customers with efficient and reliable logistics solutions.
1. Issuer Overview
Company Profile: SF Holding Co., Ltd., founded in 1993, is headquartered in Shenzhen, Guangdong Province, China. SF is the largest comprehensive logistics service provider in China and Asia, and the fourth largest globally.
Background: SF was established in 1993 in Shunde City, Guangdong Province. After 31 years of development, it has become a leading enterprise in the global logistics industry.
Major Shareholders: As of the latest practicable date, Mingde Holdings directly and indirectly (through Shenzhen Weisun) controls approximately 55.27% of SF's equity, while Mr. Wang Wei directly holds 99.90% of Mingde Holdings.
2. Basic Information of the Current Offering
Number of Shares Offered: Global offering of 170,000,000 H shares.
Par Value per Share: RMB 1.00.
Offering Price per Share: Maximum of HKD 36.30 per H share, minimum of HKD 32.30 per H share.
Offering Date: Expected pricing date is November 25, 2024, with the global offering anticipated to commence on November 27, 2024.
Target Exchange and Board: Main Board of The Stock Exchange of Hong Kong.
Total Share Capital Post-Offering: 4,816,186,983 shares.
3. Core Business
Core Business: SF provides comprehensive domestic and international logistics services, including express delivery, freight transportation, cold chain logistics, intra-city instant delivery, supply chain solutions, and international logistics services. SF's business model is characterized by three key attributes: direct operation, integrated logistics capabilities, and independence as a third-party provider.
Competitive Advantages: SF boasts a strong logistics network, advanced technology, and high-quality services, enabling it to deliver efficient and reliable logistics solutions. Its leading position in China and Asia, extensive global coverage, robust operational capabilities, and technological innovation are its core competitive strengths.
4. Industry and Market Position
Market Position: SF is the largest comprehensive logistics service provider in China and Asia, and the fourth largest globally. It holds leading positions in multiple logistics segments.
Competitive Edge: SF's strong logistics network, advanced technology, and high-quality services allow it to provide efficient and reliable logistics solutions. Its leadership in China and Asia, broad global reach, operational strength, and technological innovation are its key competitive advantages.
5. Corporate Governance and Independence
Corporate Governance: SF is committed to becoming a global leader in the logistics industry, connecting Asia with the world. Its management team possesses extensive industry experience and expertise, dedicated to delivering high-quality services to customers.
Independence: As an independent third-party logistics service provider, SF maintains neutrality toward platforms and merchants, ensuring fair services for all clients.
6. Use of Proceeds
Use of Proceeds: Assuming an offering price of HKD 34.30 per share (the midpoint of the indicative price range), after deducting underwriting fees, commissions, and other estimated expenses, SF expects to receive net proceeds of approximately HKD 5,661.3 million from the global offering. Approximately 45.0% of the net proceeds will be used to strengthen SF's international and cross-border logistics capabilities, 35.0% to enhance and optimize its logistics network and services in China, 10.0% for R&D in advanced technology and digital solutions to upgrade its supply chain and logistics services and implement ESG initiatives, and 10.0% for working capital and general corporate purposes.
Offering Information and Lottery Rate:
The company is offering 170 million shares globally, with 200 shares per lot. As of this writing, the offering is oversubscribed by 6.59 times. Based on current margin financing, there will be no clawback. There are 40,375 lots each for Group A and Group B, with an estimated 6,000–12,000 participants. The lottery rate for one lot is expected to be around 100%.
Cornerstone Investors:
The company has secured 10 cornerstone investors. At the lower price, cornerstones account for 28.99% of the offering; at the midpoint, 27.30%; and at the upper price, 25.79%. The cornerstone lock-up period is 6 months.
Sponsors:
SF Holding's offering is jointly sponsored by Goldman Sachs, Huatai Financial, and JP Morgan, with JP Morgan acting as the stabilizing manager. Goldman Sachs' recent sponsored projects have performed decently; Huatai Financial has seen multiple breakings; JP Morgan's three sponsored projects this year include one flat close—after deducting fees, all three projects broke. As the stabilizing manager, the performance is similar.
Financial Highlights:
Revenue:2021 revenue: RMB 207.186 billion; 2022 revenue: RMB 267.490 billion; 2023 revenue: RMB 258.409 billion; LTM revenue as of June 30, 2024: RMB 268.453 billion.
Gross Profit:2021 gross profit: RMB 25.777 billion; 2022 gross profit: RMB 33.012 billion; 2023 gross profit: RMB 32.633 billion; LTM gross profit as of June 30, 2024: RMB 34.338 billion.
Net Profit:2021 net profit: RMB 4.382 billion; 2022 net profit: RMB 7.056 billion; 2023 net profit: RMB 7.911 billion; LTM net profit as of June 30, 2024: RMB 8.778 billion.
Comprehensive Review:
SF Holding is a leading company in the express delivery industry. At the lower price, the A/H premium is 34%; at the upper price, it is 20%. The quality of such a Fortune 500 company speaks for itself. In terms of funding, the company has secured 10 cornerstone investors, with subscription amounts totaling USD 204.8 million (~HKD 1.594 billion). The total offering size is HKD 5.492–6.172 billion. After deducting cornerstone allocations, the free float is HKD 3.898–4.578 billion.
Market sentiment is lukewarm due to the sponsors' mediocre track record and the current bearish trend in Hong Kong stocks. Midea Group's listing coincided with a market rebound, highlighting the role of luck in investments. Historically, dual-listed A/H shares tend to perform modestly on debut. If investors are bullish on the company, they can always buy shares in the A-share market without the lottery fee. The core of IPO subscriptions is arbitrage, and this offering, with potential gains/losses of 3–5% plus fees, offers limited appeal.
Subscription Plan:
I will pass on this offering.
$SF Holding(002352.SZ) $SF HOLDING(06936.HK)
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