HomeMarket NewsSmall CapsSF Intra-City Struggles as Parent Company's Hong Kong IPO Stalls

SF Intra-City Struggles as Parent Company’s Hong Kong IPO Stalls

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When Hangzhou SF Intra-city Industrial Co. Ltd. announced its $26 million share repurchase plan, it hoped to demonstrate confidence in its business outlook and prospects. However, like many other stocks in the current weak market, the share price remains unchanged. This lackluster performance can be attributed to China’s sputtering economy, which is affecting companies reliant on consumer spending like SF Intra-city, China’s largest third-party intra-city delivery service provider.

SF Intra-city operates independently from its parent company, SF Holding Co. Ltd., since 2019, and raised HK$2.15 billion in a Hong Kong IPO two years later. Despite a promising start, the company’s shares were dragged down by Covid losses. However, there have been signs of recovery with the easing of Covid restrictions. In the first half of this year, SF Intra-city saw a 28.8% increase in revenue, more than doubling its gross profit. It also returned to profitability with a half-year profit of 30.3 million yuan.

SF Intra-city is just one of two listed offspring of SF Holding, with the other being SF Real Estate Investment Trust (SF REIT). SF REIT, operator of premium logistics centers, had a strong start as a publicly traded company but faced challenges due to China’s strict Covid controls. Despite strong financial performance, SF REIT’s shares are currently trading about 40% below their offer price.

While SF Intra-city is the larger of the two companies by market cap, it is less favored by investors compared to SF REIT. SF Intra-city has a price-to-sales (P/S) ratio of just 0.52, while SF REIT trades at a frothy 4.7. This may be attributed to SF REIT’s unique position as a publicly traded logistics real estate company. JD.com-backed Dada Nexus, another intra-city delivery service provider, trades at a slightly higher P/S ratio than SF Intra-city.

Both SF Intra-city and SF REIT are controlled by Wang Wei, the founder of SF Holding. Wang, who owns about 60% of each company, is aiming to list SF Holding in Hong Kong, which could raise up to $3 billion. This move would further establish SF Holding as a global contender in the logistics industry, competing with companies like UPS, Deutsch Post AG, and FedEx Corp.

Labor costs are a significant expense for all three listed members of the SF family. SF Intra-city, SF Express, and SF REIT rely on a large workforce to operate their delivery services and warehouses. The current lack of market appetite for China stocks, coupled with rising wages for employees, contributes to the challenges faced by SF companies in moving forward with their IPO plans.

Despite the current market conditions, SF Intra-city remains determined to navigate the challenging economic environment and demonstrate its resilience in the intra-city delivery sector.

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