HONG KONG (BLOOMBERG) - JD.com plans to list its shipping business in Hong Kong, raising potentially billions of dollars to capitalize on China's post-Covid e-commerce boom.
JD Logistics' initial public offering could raise roughly US$5 billion (S$6.6 billion) and value the unit at about US$40 billion, people familiar with the matter have said. Details of the proposed spinoff haven't been finalized, the company said in an IPO prospectus filed to the stock exchange.
JD.com's shares gained more than 6 per cent to a record in Hong Kong on Wednesday (Feb 17).
The Chinese e-commerce operator joins an IPO rush fueled by flush liquidity in markets worldwide, with Hong Kong in particular emerging as a hot venue for tech coming-out parties. Kuaishou Technology in January completed the biggest internet debut since Uber Technologies', marking the best start to a year for Asian stock listings on record. New Horizon Health Ltd. this week became the second-most popular Hong Kong IPO among retail investors in the city's history.
JD Logistics should similarly draw interest. Shopping sites from Alibaba Group Holding to Pinduoduo have benefited as Covid-19 lockdowns drove consumers online and galvanized demand for the services that deliver parcels to doorsteps. Chinese e-commerce revenue should surpass 50 per cent of the country's total retail sales this year - a first anywhere in the world, according to researcher EMarketer. BofA Securities, Goldman Sachs Group and Haitong International Capital are the joint sponsors of the proposed IPO, according to the prospectus.
JD Logistics's imminent IPO would be a milestone for its parent, which spent billions of dollars building one of China's largest courier services to ensure on-time delivery and retain control over its shipping network. That inhouse operation, which spanned more than 800 warehouses across the country as of Sept 30., has been credited for speeding JD.com's recovery from early Covid-19 disruptions.
"The spinoff and separate listing will help JD.com crystallize the value of its logistics arm, which it had invested in heavily for more than a decade," Bloomberg Intelligence analyst Vey-Sern Ling said. "The funds raised can aid JD Logistics's expansion without burdening JD.com. Going forward investors and management can focus on two distinct businesses, e-commerce and logistics, which have different growth and profitability profiles."
Chinese e-commerce sales have increased several fold during the pandemic, making companies that help handle shipping and deliveries particularly attractive, Elysia Tse, head of Asia Pacific research and strategy at LaSalle Investment Management, said in an interview with Bloomberg Television this month.
JD Logistics's net loss narrowed to 11.7 million yuan (S$2.4 million) in the nine months ended September from more than 80 times that a year earlier. Losses attributable to the company's owners also narrowed to 71.2 million yuan from almost a billion yuan a year earlier. And revenue growth accelerated 43.2 per cent to 49.5 billion yuan during the period, according to its filing.
The continuing boom in Asian listings follows on from the trend seen last year globally, where investors piled into offerings in search for returns, sending company valuations soaring on their debuts. Listings globally have had a record-breaking start to the year thanks to a surge in SPAC listings, equities hitting fresh highs and hordes of retail traders flocking to markets.
The IPO will "lead to a re-rating for a pretty substantial part of JD's business, which in turn should be good for JD's shares," said Robin Zhu, a senior analyst at Bernstein Research in Hong Kong. "More upside is likely as we get more color that enables us to value JD Logistics properly."
