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Shares of Indonesia’s J&T Express fell 1.33% when it went public on Friday.
The logistics service supplier traded at 11.84 Hong Kong {dollars} ($1.51) on Friday morning, after opening at HK$12.
The HK$3.92 billion ($500 million) IPO is the second largest itemizing in Hong Kong this yr, after premium Chinese liquor firm ZJLD Group. The Chinese “baijiu” maker, backed by KKR, plunged almost 18% on their first day of trading on April 27.
Investors embody Chinese tech big Tencent, U.S.-based enterprise capital agency Sequoia, Chinese non-public fairness agency Boyu, SF Express and Singapore’s sovereign wealth fund Temasek.
J&T Express is itemizing in an unsure financial setting, characterised by climbing inflation, excessive rates of interest and ongoing battle such because the Israel-Hamas conflict and Ukraine invasion.
“In the third quarter of 2023, international IPO actions remained sluggish because of macroeconomic and geopolitical uncertainties. Hong Kong’s international IPO rating dropped to eighth following a traditionally gradual third quarter,” mentioned KPMG in a report printed on Oct. 9.
“The Hong Kong market has not recovered as a lot as we want,” Irene Chu, companion at KPMG China, informed CNBC, highlighting that the third quarter “continued to be very comfortable.”
J&T had initially aimed to lift not less than $1 billion in the IPO however halved the goal quantity on weak investor demand, based on Reuters.
Companies that wish to go public have “grow to be extra real looking” in their pricing, mentioned Ringo Choi, Asia-Pacific IPO chief at EY. “The IPO pricing is dropping considerably by greater than 50% and even 70%.”
China is J&T’s largest market, the place it delivered almost 83% of its whole parcels final yr, serving the likes ecommerce giants like Pinduoduo and Alibaba’s Taobao and Tmall. It held a ten.9% market share by parcel quantity in 2022, the corporate mentioned in its prospectus, citing Frost & Sullivan.
In May, it acquired China-based Fengwang Express for 1.18 billon yuan from largest home participant SF Express, constructing on its acquisition of express delivery business from Chinese logistics agency Best in late 2021.
The Indonesian logistics supplier delivered a complete of greater than 14.5 billion parcels in 2022 throughout China and Southeast Asia, up from 11.5 billion in 2020. In Southeast Asia, it’s the largest operator with a 22.5% market share in phrases of parcel quantity, based mostly on Frost & Sullivan information. Alibaba-owned Lazada, GoTo’s e-commerce arm Tokopedia and Sea Limited‘s Shopee, are amongst its prospects, the prospectus confirmed.
It posted a internet revenue of $1.57 billion in 2022 however went into the red in the primary six months of this yr Net losses got here in at $666.8 million, because of gross losses from operations in China and new market growth in 2022, amongst others.
“In the long run, to proceed to understand our income potential and obtain profitability, we plan to additional develop our parcel quantity and market share, keep a versatile pricing technique, management prices, slim gross loss and enhance gross margin, and improve working leverage,” mentioned J&T in its prospectus.
‘Immaterial’ influence from TikTookay Shop ban
Analysts warn that TikTok Shop’s ban in Indonesia, which disallows social media platforms from facilitating e-commerce purchases, might influence J&T Express.
TikTookay Shop is the e-commerce characteristic of common short-video app TikTookay.
“There is a few sharp short-term ache for J&T in Indonesia as a result of of the TikTookay Shop ban, as J&T was (profitably) carrying the majority of the TikTookay Shop’s thousands and thousands of orders a day in Indonesia previous to the ban,” mentioned Momentum Works in a Oct. 17 blog post.
J&T Express acknowledged in its submitting that “there stay important uncertainties” on how the brand new guidelines would influence totally different e-commerce and social media platforms in Indonesia, “some of that are our prospects.”
But the corporate mentioned it won’t be adversely impacted because the income from social e-commerce platforms in Indonesia “remained immaterial” to the enterprise.
In 2022 and the primary six months of this yr, income from social e-commerce platforms in Indonesia contributed solely 4% and 6% to the corporate’s income respectively, mentioned J&T.
“We imagine that though [the new e-commerce regulation] might have an effect on our buyer composition in Indonesia in the close to time period, this new regulation won’t have a cloth antagonistic impact on our enterprise operations and monetary efficiency in the long run.”