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

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<p>Although slightly weaker than the exceptional growth reported in September and October, Chinese express parcel <em>volume</em> growth remained strong in December, up 37% YoY. </p>
<p>Unfortunately, <em>pricing</em> remained weak in December, with some companies reporting YoY unit  declines of more than 25%. Such sharp declines can quickly erode profit margins and cash flow. </p>
<p>Our investment thesis for the sector remains intact: growing financial pressures within China's express sector will lead to necessary industry consolidation, probably in 2021. </p>




Although slightly weaker than the exceptional growth reported in September and October, Chinese express parcel volume growth remained strong in December, up 37% YoY. 
Unfortunately, pricing remained weak in December, with some companies reporting YoY unit  declines of more than 25%. Such sharp declines can quickly erode profit margins and cash flow. 
Our investment thesis for the sector remains intact: growing financial pressures within China's express sector will lead to necessary industry consolidation, probably in 2021. 

TRACKING TRAFFIC/Chinese Express: Volumes UP | Pricing DOWN | Time for Consolidation

Equity Capital Markets

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<p>The goal of this new product is to monitor the progress of upcoming and recently-completed IPOs and deals in the Asian logistics, transportation and travel space. We'll also look at deals in related segments, including eCommerce fulfillment, ride-hailing, online food delivery, and warehousing.</p>
<p>Each issue will feature news and commentary on planned IPOs and other major deals in the logistics space, plus an update on the performance of recent IPOs and deals. We'll also profile a prominent private Asian company in the sector that could soon seek a public listing.  </p>
<p>In this issue we review planned listings from <a href="https://www.smartkarma.com/entities/dida-inc" target="_blank" data-smartkarma-citation="entities:29701:1" rel="noopener">Dida (DIDA HK)</a> and <a href="https://www.smartkarma.com/entities/zim-integrated-shipping-services-ltd" target="_blank" data-smartkarma-citation="entities:31124:1" rel="noopener">ZIM Integrated Shipping Services (ZIM US)</a>, check in on the share performance of four recent logistics-related IPOs, and introduce private Hive-Box Holdings (HBH), the world's largest operator of smart lockers. </p>




The goal of this new product is to monitor the progress of upcoming and recently-completed IPOs and deals in the Asian logistics, transportation and travel space. We'll also look at deals in related segments, including eCommerce fulfillment, ride-hailing, online food delivery, and warehousing.
Each issue will feature news and commentary on planned IPOs and other major deals in the logistics space, plus an update on the performance of recent IPOs and deals. We'll also profile a prominent private Asian company in the sector that could soon seek a public listing.  
In this issue we review planned listings from Dida (DIDA HK) and ZIM Integrated Shipping Services (ZIM US), check in on the share performance of four recent logistics-related IPOs, and introduce private Hive-Box Holdings (HBH), the world's largest operator of smart lockers. 

TRACKING TRAFFIC/Logistics Capital Markets Monitor | IPOs | M&A | Pre-IPO Profile: Hive-Box Holdings

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<p>It's been a <em>long</em> time since we looked at and wrote about <a href="https://www.smartkarma.com/entities/cj-korea-express-corp" target="_blank" data-smartkarma-citation="entities:11557:1" rel="noopener">CJ Logistics (000120 KS)</a>. In a note we published here way back in June 2017, we said it was highly unlikely CJ Logistics would see the margin improvement needed to hit analysts' consensus forecast of 6,400 won per share in 2018.</p>
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<p>Specifically, we doubted that higher margins would be driven by growth of the company's <em>Global</em> segment, which includes CJ's international freight forwarding business and several overseas logistics units CJ had acquired in an effort to create a "Pan-Asian Logistics Network".</p>
<p>Since we last wrote about the company, CJ Logistics has apparently abandoned its push to become a major player in logistics <em>outside</em> of Korea, focusing instead on a disparate list of domestic initiatives. Overall profitability remains similar to depressed levels from 3-4 years ago. </p>
<p>Since we last tracked them, CJ Logistics' shares haven't performed well: they're down about 24% compared to their 5-year high reached in mid-2016, though like many stocks they have risen from depressed Q120 levels. Unless CJ Logistics can articulate a winning long-term strategy, and then show consistent progress towards executing it successfully, we would avoid the shares. </p>



It's been a long time since we looked at and wrote about CJ Logistics (000120 KS). In a note we published here way back in June 2017, we said it was highly unlikely CJ Logistics would see the margin improvement needed to hit analysts' consensus forecast of 6,400 won per share in 2018.

Specifically, we doubted that higher margins would be driven by growth of the company's Global segment, which includes CJ's international freight forwarding business and several overseas logistics units CJ had acquired in an effort to create a "Pan-Asian Logistics Network".
Since we last wrote about the company, CJ Logistics has apparently abandoned its push to become a major player in logistics outside of Korea, focusing instead on a disparate list of domestic initiatives. Overall profitability remains similar to depressed levels from 3-4 years ago. 
Since we last tracked them, CJ Logistics' shares haven't performed well: they're down about 24% compared to their 5-year high reached in mid-2016, though like many stocks they have risen from depressed Q120 levels. Unless CJ Logistics can articulate a winning long-term strategy, and then show consistent progress towards executing it successfully, we would avoid the shares. 

CJ Logistics: Still Lacking Focus, Still Unlikely to Reach 6,000+ EPS Any Time Soon

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<p>In this note, we explain how authorities in China measure the development of the country's express parcel delivery industry using the China Express Development Index, or CEDI. </p>
<p>We believe CEDI is worth watching. Its December 2020 performance suggests sector growth is moderating, and that express companies must continue to invest aggressively to lift service levels. </p>
<p>CEDI's recent trends support our investment thesis for the sector, which is that pressure to consolidate is rising here in 2021. We believe <a href="https://www.smartkarma.com/entities/best-inc" target="_blank" data-smartkarma-citation="entities:25494:1" rel="noopener">BEST Inc (BEST US)</a> may become an attractive acquisition target over the next 12 months; we rate its shares Buy. </p>




In this note, we explain how authorities in China measure the development of the country's express parcel delivery industry using the China Express Development Index, or CEDI. 
We believe CEDI is worth watching. Its December 2020 performance suggests sector growth is moderating, and that express companies must continue to invest aggressively to lift service levels. 
CEDI's recent trends support our investment thesis for the sector, which is that pressure to consolidate is rising here in 2021. We believe BEST Inc (BEST US) may become an attractive acquisition target over the next 12 months; we rate its shares Buy. 

How Chinese Authorities Measure the Development of the Express Sector, & Why It Matters to Investors

Event-Driven

China Logistics Property Holdings / Event-Driven

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/180/424/original/BANNER-TTOtherDec20_GreyOrange.png?1609259067" class="editor-image img-responsive" data-smartkarma-image-id="180424"></figure></section><p>On Tuesday <a href="https://www.smartkarma.com/entities/china-logistics-property-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:22799:1" rel="noopener">China Logistics Property Holdings (1589 HK)</a> released a statement that confirmed chatter indicating two major shareholders are considering a sale of their stakes, which total 51.5%.</p><p>In this note we attempt to put the potential sale of controlling stakes in CLPH (or the entire company) into context by looking at the 2017 privatization of <a href="https://www.smartkarma.com/entities/global-logistic-properties-ltd" target="_blank" data-smartkarma-citation="entities:2894:1" rel="noopener">Global Logistic Properties (GLP SP)</a>, still the largest single owner of modern warehouse space in China. </p><p>We also provide a list of potential acquirers of the CLPH stakes, assuming a sale occurs eventually. In our view, there are at least seven companies that feature the financial might and the relationships needed to acquire CLPH's warehouse assets in China. </p><p>CLPH's shares are up about 35% YTD, but compared to GLP's EV/Portfolio and EV/Completed SQM multiples at the time of its privatization, valuations do not appear stretched. We believe suitors eager to add scarce Chinese warehouse assets could bid shares up above HK$5.0. </p>

On Tuesday China Logistics Property Holdings (1589 HK) released a statement that confirmed chatter indicating two major shareholders are considering a sale of their stakes, which total 51.5%.In this note we attempt to put the potential sale of controlling stakes in CLPH (or the entire company) into context by looking at the 2017 privatization of Global Logistic Properties (GLP SP), still the largest single owner of modern warehouse space in China. We also provide a list of potential acquirers of the CLPH stakes, assuming a sale occurs eventually. In our view, there are at least seven companies that feature the financial might and the relationships needed to acquire CLPH's warehouse assets in China. CLPH's shares are up about 35% YTD, but compared to GLP's EV/Portfolio and EV/Completed SQM multiples at the time of its privatization, valuations do not appear stretched. We believe suitors eager to add scarce Chinese warehouse assets could bid shares up above HK$5.0. 

Major Shareholders of CLPH (1589:HK) Selling! Revisiting Narrative & Valuations

China

S.F. Holding Co., Ltd operates as a holding company. The Company, through its subsidiaries, provides logistics, order tracking, supply chain management, and warehousing services. S.F. Holding operates worldwide.

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S.F. Holding (002352 CH)

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