China Logistics, AirAsia Eye HK; Qufenqi Raises Big Bucks

by: Doug Young

Bottom line: China Logistics’ IPO could rise 5-10 percent in its trading debut, while AirAsia could list in Hong Kong by year-end and online lender Qufenqi could follow with an IPO in the first half of 2017.

Hong Kong IPOs continue to heat up as we head into the heart of summer, with word of a major new listing from China Logistics Property and reports that budget carrier AirAsia may also be eyeing an offering in the market. Meantime, Qufenqi, the hot online lender that targets students, has just raised a hefty 3 billion yuan ($450 million) in new funding, in a prelude to what could become one of next year’s hottest IPOs. All of this comes against the backdrop of a looming mega offering by China’s Postal Savings Bank, whose $8 billion fund-raising target would make it the world’s biggest IPO since Alibaba’s (NYSE:BABA) blockbuster $25 billion offering 2 years ago.

This sudden pick-up in IPO activity is slightly unexpected, since China’s economy and stock markets aren’t exactly booming these days. But stability over the last few months in China’s domestic stock markets appears to be fueling investor appetite for new listings, especially for companies that are relatively recession-proof.

One such company could be China Logistics, which is backed by US private equity giant Carlyle and is set to raise about HK$3.38 billion ($435 million) in a fairly large new Hong Kong listing. (English article; Chinese article) The company priced its stock at HK$3.25 per share, or at the very top of its range, indicating that demand was quite strong.

The company’s finances also look quite strong though modest, with revenue up 142 percent last year to 163.2 million yuan ($24.4 million). China Logistics operates 12 logistics parks throughout China, which are banking on demand from a wide range of companies like e-commerce giant JD.com (NASDAQ:JD) and delivery services provider SF Express. It does seem to be in a lucrative niche with plenty of room for more growth, and I expect these shares will do relatively well, rising 5-10 percent on their trading debut.

Next there’s AirAsia (Malaysia: AIRA), whose potential new Hong Kong IPO would complement its shares that are now traded in Malaysia. Word of this particular deal came on the sidelines of a major trade show taking place this week in Europe, so it’s still a bit unclear how advanced such a plan is. (English article)

Fueling Expansion

The reports say that AirAsia’s chief has talked about a potential dual listing without naming a specific location. They add the company would use funds from such an offering to help fuel an aggressive expansion, including formation of a China joint venture. The company is facing a big challenge in the region from a new crop of budget carriers coming from China, led by the equally aggressive Spring Airlines (Shanghai: 601021).

AirAsia is talking to Chinese banks and potential shareholders about backing and underwriting such a deal, meaning an offering is still probably at least half a year away. But the airline’s Malaysia traded stock has been doing relatively well since some earlier recent turbulence, and I expect this offering should also do quite well.

Finally there’s Qufenqi, whose 3 billion yuan fund-raising is one of the largest I’ve seen in a while for a firm at this stage of development. (English article; Chinese article) The firm has thrived by targeting college students with relatively small loans for items like TVs and smartphones, and is expanding beyond that to target younger borrowers in general.

The reports specifically call this funding a pre-IPO round, and the size does seem to indicate it could be the last before a formal public listing. The company would become one of the first of a new generation of privately-owned Chinese financial services firms to list, alongside others like P2P lender Lufax, Alibaba-affiliated Ant Financial and Tiger Brokers, an app operator targeting Chinese buyers of US and Hong Kong stocks. I would expect many of these listings to draw big investor demand, though we probably won’t see any come to market until next year.

Disclosure: None