Chinese courier service giant ZTO Express (Cayman) said the capital raised from a secondary listing in Hong Kong would be used to transform the company into a comprehensive logistics solutions provider.
“The Chinese logistics market is still very much underserved,” said Yan Huiping, chief financial officer of ZTO. “In specialised areas such as cold chain, there’s no scale [and it’s] very much fragmented. The standard of service has not been fully established. ZTO is the best contender to make a foray into those areas.”
The New York-listed company in which Alibaba Group Holding owns an 8.7 stake netted HK$9.81 billion (US$1.27 billion) from the sale of 45 million shares at HK$218 each.
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It could raise an additional HK$1.46 billion if an over-allotment option of 6.75 million shares is exercised.
ZTO closed the first day of trading in Hong Kong 9.2 per cent higher at HK$238. The shares trade at a 4 per cent discount to their New York-listed counterparts which ended at US$31.97 on Monday.
ZTO plans to use the share proceeds to expand its infrastructure and capacity, strengthen its network and invest in its logistics ecosystem. The Shanghai-based company said its delivery network covers 99.2 per cent of cities and counties across China.
“We defined ourselves as a delivery firm when we conducted an initial public offering in New York in 2016,” Yan said. “We have seen tremendous opportunities in expanding into other logistics segments over the past few years.”
She also said the company was mulling a listing on China’s Nasdaq-like Star Market, but there is no “definite plan” as yet.
ZTO raised U$1.4 billion by floating 72.1 million American depository shares at US$19.5 a piece in October 2016.
ZTO’s move to list closer to its home market comes amid escalating tensions between Beijing and Washington. It is the latest Chinese company that originally raised stock market funds in the United States, and follows secondary listings in Hong Kong this year by technology companies JD.com and NetEase, and Yum China, the Chinese operator of KFC and Pizza Hut restaurants.
Overall these firms have raised about US$10 billion this year.
“Delivery firms in China still have growth potential after fast development in the previous five years,” said Zhao Xiaomin, an angel investor and independent researcher of China’s logistics sector. “Additional growth is likely to take place in the B2B [business-to-business] segment.”
He added that competition will intensify as other courier giants including YTO, SF Express, STO and Yunda are also looking to expand their businesses.
Chinese courier services firms, which have benefited vastly from growing e-commerce in China amid a change in people’s lifestyle and consumption habits, have been rapidly expanding their networks and upgrading facilities to keep up with the surging demand.
ZTO now handles 50 million parcels a day and Yan said the volume could double to 100 million in one to two years’ time as the company boosts its investment in infrastructure and technology.
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