Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

The express sector's big news is that <a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US) </a>is seeking an IPO in Hong Kong, as many large Chinese tech companies have done in recent months. We understand the rationale for this move, but still dislike the company's deteriorating fundamentals and rich valuation. 
In August, express sector volume growth remained firm (+36.5% YoY), but revenue growth slowed (+17.9%, slowest since March) as average unit pricing tumbled. We believe the current price war will continue in the medium-term, eating into express companies' margins and cash flow.
Outside of China, <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> has filed IPO documents. We believe this offering is worth watching, as KEX may be the only public 'pure play' on eCommerce logistics in SE Asia. A successful IPO should also boost sentiment toward <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a>.
Conclusion: Owning independent market leader <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> against short positions in any of the listed express companies aligned with <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> has been a winning strategy in 2020, and we see no reason to change course in the near-term.

The express sector's big news is that ZTO Express (ZTO US) is seeking an IPO in Hong Kong, as many large Chinese tech companies have done in recent months. We understand the rationale for this move, but still dislike the company's deteriorating fundamentals and rich valuation. 
In August, express sector volume growth remained firm (+36.5% YoY), but revenue growth slowed (+17.9%, slowest since March) as average unit pricing tumbled. We believe the current price war will continue in the medium-term, eating into express companies' margins and cash flow.
Outside of China, Kerry Express Thailand (KEX TB) has filed IPO documents. We believe this offering is worth watching, as KEX may be the only public 'pure play' on eCommerce logistics in SE Asia. A successful IPO should also boost sentiment toward Kerry Logistics Network (636 HK).
Conclusion: Owning independent market leader S.F. Holding (002352 CH) against short positions in any of the listed express companies aligned with Alibaba Group (BABA US) has been a winning strategy in 2020, and we see no reason to change course in the near-term. 

TRACKING TRAFFIC/Chinese Express: ZTO HK Listing | August Pricing Still Weak | KEX IPO in Bangkok

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Equity Capital Markets

Kerry Express Thailand / Equity Capital Markets

In this section, we delve into the question of whether it is a good idea (and what level) investors should consider to participate in this upcoming IPO. In addition, we look at some of the key risks in the delivery business.<ul>
<li>
DCF valuation. We value KEX at Bt26/sh, implying an above average PE of 29.2x. The company has a stronger growth profile than the rest of corporate Thailand and strong exposure to the rising e-commerce theme.</li>
<li>
Relative valuation. We value KEX at Bt20.2/sh using international delivery peers, as there are no listed comparables in Thailand. KEX enjoys the second highest ROE in its peer group or roughly double the average.</li>
<li>
EV/revenue. With input from <a href="https://www.smartkarma.com/companies/tracking-traffic" target="_blank" data-smartkarma-citation="companies:29487" rel="noopener">Tracking Traffic</a>'s <a href="https://www.smartkarma.com/profiles/daniel-hellberg" target="_blank" data-smartkarma-citation="accounts:605" rel="noopener">Daniel Hellberg</a> , we arrived at a similar price target of Bt26.7/sh based on target EV/revenue of 2.26x based on Chinese peers, but due to the difference in scale between China and Thailand, EV/parcel may be less applicable.</li>
<li>
Key risks to the firm includes: 1) competitive risks, which ties into IP risk; 2) business interruption due to pandemic; 3) reputation risk; 4) personnel-related risks; 5) insurance non-coverage; and 6) branding risk.</li>
</ul>

In this section, we delve into the question of whether it is a good idea (and what level) investors should consider to participate in this upcoming IPO. In addition, we look at some of the key risks in the delivery business.

DCF valuation. We value KEX at Bt26/sh, implying an above average PE of 29.2x. The company has a stronger growth profile than the rest of corporate Thailand and strong exposure to the rising e-commerce theme.

Relative valuation. We value KEX at Bt20.2/sh using international delivery peers, as there are no listed comparables in Thailand. KEX enjoys the second highest ROE in its peer group or roughly double the average.

EV/revenue. With input from Tracking Traffic's Daniel Hellberg , we arrived at a similar price target of Bt26.7/sh based on target EV/revenue of 2.26x based on Chinese peers, but due to the difference in scale between China and Thailand, EV/parcel may be less applicable.

Key risks to the firm includes: 1) competitive risks, which ties into IP risk; 2) business interruption due to pandemic; 3) reputation risk; 4) personnel-related risks; 5) insurance non-coverage; and 6) branding risk.


IPO Radar (Part 2): KEX, Valuation & Risk

One of the year's most anticipated IPO has arrived. It's Kerry (Thailand) 'KEX', and chances are if you ever ordered a parcel delivered on the Internet, you've been their customer. In the first part, we will touch on the following:<ul>
<li>
The IPO is firmly underwritten by MayBank Kim Eng, the country's biggest broker, and SCB and is good for 300m shrs of 17% of the company's outstanding.</li>
<li>
The Business. Kerry is the country's largest private delivery service (Only the state-owned Thai Post has greater volume) able to deliver 1.2m parcels annually and commanding a fleet of more than 20,000 vehicles. Its logistic partners include ASAP, Phatra Leasing, while some of its largest customers include e-commerce giants Lazada, Shoppee, and Central JD.com.</li>
<li>
The Sponsors. Its brand comes from Kerry HK, the regional delivery giant controlled by top Malaysian tycoon Robert Kuok, but it includes Thai based partner VGI, a member of BTS Group. KLN Logistics currently controls 63%, and VGI has 23% of the shares pre-IPO.</li>
<li>
The Industry. As mentioned in the CRC IPO Radar, Thai e-commerce is one of Southeast Asia's largest, has exceeded Bt200bn, and continued to grow at an accelerated pace following the pandemic. Kerry is four times larger than its next private competitor and 11x larger than the second runner-up!</li>
</ul>In the second section, we will address issues such as valuations and risk in greater detail.

One of the year's most anticipated IPO has arrived. It's Kerry (Thailand) 'KEX', and chances are if you ever ordered a parcel delivered on the Internet, you've been their customer. In the first part, we will touch on the following:

The IPO is firmly underwritten by MayBank Kim Eng, the country's biggest broker, and SCB and is good for 300m shrs of 17% of the company's outstanding.

The Business. Kerry is the country's largest private delivery service (Only the state-owned Thai Post has greater volume) able to deliver 1.2m parcels annually and commanding a fleet of more than 20,000 vehicles. Its logistic partners include ASAP, Phatra Leasing, while some of its largest customers include e-commerce giants Lazada, Shoppee, and Central JD.com.

The Sponsors. Its brand comes from Kerry HK, the regional delivery giant controlled by top Malaysian tycoon Robert Kuok, but it includes Thai based partner VGI, a member of BTS Group. KLN Logistics currently controls 63%, and VGI has 23% of the shares pre-IPO.

The Industry. As mentioned in the CRC IPO Radar, Thai e-commerce is one of Southeast Asia's largest, has exceeded Bt200bn, and continued to grow at an accelerated pace following the pandemic. Kerry is four times larger than its next private competitor and 11x larger than the second runner-up!
In the second section, we will address issues such as valuations and risk in greater detail.

IPO Radar (Part 1): Kerry Express, the Engine Powering Thai E-Commerce

Thailand

Kerry Express Thailand is a parcel delivery provider in Thailand

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TRACKING TRAFFIC/Chinese Express: ZTO HK Listing | August Pricing Still Weak | KEX IPO in Bangkok

Big news is ZTO Express (ZTO US) launching

Tracking Traffic

IPO Radar (Part 2): KEX, Valuation & Risk

In this section, we delve into the question of whether it is a good

Athaporn Arayasantiparb, CFA

IPO Radar (Part 1): Kerry Express, the Engine Powering Thai E-Commerce

One of the year's most anti

Athaporn Arayasantiparb, CFA