Tencent-backed J&T Specific fell in Hong Kong IPO debut

Shares of Indonesia’s J&T Specific 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 12 months, after premium Chinese language liquor firm ZJLD Group. The Chinese language “baijiu” maker, backed by KKR, plunged almost 18% on their first day of buying and selling on April 27.

Buyers embody Chinese language tech big Tencent, U.S.-based enterprise capital agency Sequoia, Chinese language personal fairness agency Boyu, SF Specific and Singapore’s sovereign wealth fund Temasek.

J&T Specific is itemizing in an unsure financial surroundings, characterised by climbing inflation, excessive rates of interest and ongoing battle such because the Israel-Hamas battle and Ukraine invasion.

“Within the third quarter of 2023, world IPO actions remained sluggish as a result of macroeconomic and geopolitical uncertainties. Hong Kong’s world IPO rating dropped to eighth following a traditionally gradual third quarter,” stated KPMG in a report printed on Oct. 9.

“The Hong Kong market has not recovered as a lot as we wish,” Irene Chu, accomplice at KPMG China, informed CNBC, highlighting that the third quarter “continued to be very mushy.”

J&T had initially aimed to boost at the very least $1 billion within the IPO however halved the goal quantity on weak investor demand, based on Reuters.

Firms that wish to go public have “develop into extra sensible” of their pricing, stated 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 complete parcels final 12 months, 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 stated in its prospectus, citing Frost & Sullivan.

In Might, it acquired China-based Fengwang Specific for 1.18 billon yuan from largest home participant SF Specific, constructing on its acquisition of categorical supply enterprise from Chinese language logistics agency Greatest 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 by way of parcel quantity, based mostly on Frost & Sullivan knowledge. Alibaba-owned Lazada, GoTo’s e-commerce arm Tokopedia and Sea Restricted‘s Shopee, are amongst its clients, the prospectus confirmed.

It posted a internet revenue of $1.57 billion in 2022 however went into the crimson within the first six months of this 12 months Web losses got here in at $666.8 million, as a result of gross losses from operations in China and new market enlargement in 2022, amongst others.

“In the long run, to proceed to comprehend our income potential and obtain profitability, we plan to additional develop our parcel quantity and market share, keep a versatile pricing technique, management prices, slender gross loss and enhance gross margin, and improve working leverage,” stated J&T in its prospectus.

Analysts warn that TikTok Store’s ban in Indonesia, which disallows social media platforms from facilitating e-commerce purchases, might affect J&T Specific.

TikTok Store is the e-commerce function of common short-video app TikTok.

“There may be some sharp short-term ache for J&T in Indonesia due to the TikTok Store ban, as J&T was (profitably) carrying the majority of the TikTok Store’s hundreds of thousands of orders a day in Indonesia previous to the ban,” stated Momentum Works in a Oct. 17 weblog publish.

J&T Specific acknowledged in its submitting that “there stay important uncertainties” on how the brand new guidelines would affect totally different e-commerce and social media platforms in Indonesia, “a few of that are our clients.”

However the firm stated 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 12 months, income from social e-commerce platforms in Indonesia contributed solely 4% and 6% to the corporate’s income respectively, stated J&T.

“We imagine that though [the new e-commerce regulation] might have an effect on our buyer composition in Indonesia within the close to time period, this new regulation won’t have a fabric antagonistic impact on our enterprise operations and monetary efficiency in the long run.”