Sinotrans to raise US$457M in HK share offering
China’s largest freight forwarder, Sinotrans, is planning to raise as much as US$457 million in its initial public offering in Hong Kong.
It is the first major IPO in the SAR this year, and analysts say it may attract investors eager to get into the China’s logistics sector.
Four international logistics companies have committed to taking about a one-quarter strategic stake in Sinotrans.
Last year alone, Chinese exports grew by more than a fifth to US$325 billion as more companies moved production facilities to the mainland.
Sinotrans, which distributes to 10 coastal provinces, is well positioned to benefit from the rise in demand in delivery and logistics services.
And despite increased competition with the Foreign Trade Ministry recently allowing foreign companies to take up to a 75 percent stake in local companies, management is still optimistic.
Zhang Bin, Chairman, Sinotrans, said, “There will be (an) impact but I don’t see anything significant happening. Both local and MNCs coming to China will have 3 concerns: cost, culture, and development strategy. I think the overriding concern for them is not just regulatory but a cost consideration.”
Sinotrans, which derives three-quarters of its sales from freight-forwarding, has assets, including a 70 percent stake in a Shanghai-listed air transport company.
The group also provides express delivery and shipping agency services, touting itself as the first integrated logistics operator to list overseas.
Geoffrey Galbraith, Associate Director, South China Securities, said, “The growth rates are quite strong there, and the PE is very reasonable. So you put those 2 together and the fact it’s an agency business. It just takes commission and so forth, and it doesn’t have invested assets like an airplane or ship or that many trucks. So it’s more or less an agency- type business.”
UPS, the world’s biggest parcel delivery company, is buying US$35 million worth of shares…while DHL, the regional market leader for express services, has also signed up for a 5 percent stake, worth US$65 million.
Sinotrans is another in a long list of Chinese state-owned enterprise that is going public in a bid to boost competitiveness in the international marketplace.
One of its key selling points is that it is willing to pay out as much as 50 percent of profits as dividend to its shareholders.
Sinotrans is offering its shares at between HK$1.67 to HK$2.29 a share; the price range represents 10 to 13 times the price earnings for 2003.
Final pricing is set for this Saturday, with trading expected to begin on Thursday February 13.
