Tencent-backed J&T Specific fell in Hong Kong IPO debut

Shares of Indonesia’s J&T Convey fell 1.33% when it went general public on Friday.

The logistics provider provider traded at 11.84 Hong Kong dollars ($1.51) on Friday early morning, after opening at HK$12.

The HK$3.92 billion ($500 million) IPO is the second premier listing in Hong Kong this yr, right after high quality Chinese liquor company ZJLD Group. The Chinese “baijiu” maker, backed by KKR, plunged almost 18% on their to start with working day of buying and selling on April 27.

Buyers consist of Chinese tech giant Tencent, U.S.-dependent enterprise funds firm Sequoia, Chinese private equity agency Boyu, SF Express and Singapore’s sovereign prosperity fund Temasek.

J&T Categorical is listing in an uncertain economic atmosphere, characterised by hiking inflation, substantial fascination rates and ongoing conflict these kinds of as the Israel-Hamas war and Ukraine invasion.

“In the 3rd quarter of 2023, world wide IPO pursuits remained sluggish because of to macroeconomic and geopolitical uncertainties. Hong Kong’s global IPO position dropped to eighth following a traditionally slow third quarter,” mentioned KPMG in a report published on Oct. 9.

“The Hong Kong market has not recovered as significantly as we would like,” Irene Chu, husband or wife at KPMG China, told CNBC, highlighting that the 3rd quarter “continued to be quite delicate.”

J&T experienced in the beginning aimed to elevate at minimum $1 billion in the IPO but halved the goal total on weak investor desire, in accordance to Reuters.

Companies that want to go community have “turn out to be more realistic” in their pricing, explained Ringo Choi, Asia-Pacific IPO chief at EY. “The IPO pricing is dropping drastically by more than 50% or even 70%.”

China is J&T’s greatest market place, where by it shipped almost 83% of its complete parcels last 12 months, serving the likes ecommerce giants like Pinduoduo and Alibaba’s Taobao and Tmall. It held a 10.9% industry share by parcel quantity in 2022, the company mentioned in its prospectus, citing Frost & Sullivan.

In Could, it acquired China-based mostly Fengwang Specific for 1.18 billon yuan from greatest domestic player SF Categorical, creating on its acquisition of convey shipping and delivery small business from Chinese logistics business Best in late 2021.

The Indonesian logistics supplier delivered a complete of additional than 14.5 billion parcels in 2022 throughout China and Southeast Asia, up from 11.5 billion in 2020. In Southeast Asia, it is the largest operator with a 22.5% marketplace share in phrases of parcel quantity, centered on Frost & Sullivan details. Alibaba-owned Lazada, GoTo’s e-commerce arm Tokopedia and Sea Constrained‘s Shopee, are among the its customers, the prospectus confirmed.

It posted a internet earnings of $1.57 billion in 2022 but went into the crimson in the to start with six months of this calendar year Net losses arrived in at $666.8 million, because of to gross losses from operations in China and new sector enlargement in 2022, among the other individuals.

“In the prolonged expression, to continue on to understand our profits likely and reach profitability, we prepare to even more improve our parcel quantity and current market share, manage a versatile pricing system, handle prices, slender gross decline and increase gross margin, and boost running leverage,” said J&T in its prospectus.

Analysts alert that TikTok Shop’s ban in Indonesia, which disallows social media platforms from facilitating e-commerce purchases, could affect J&T Categorical.

TikTok Store is the e-commerce aspect of common shorter-video application TikTok.

“There is some sharp small-phrase ache for J&T in Indonesia because of the TikTok Shop ban, as J&T was (profitably) carrying the majority of the TikTok Shop’s tens of millions of orders a working day in Indonesia prior to the ban,” explained Momentum Performs in a Oct. 17 web site put up.

J&T Express acknowledged in its filing that “there remain sizeable uncertainties” on how the new policies would impression unique e-commerce and social media platforms in Indonesia, “some of which are our shoppers.”

But the enterprise stated it will not be adversely impacted as the earnings from social e-commerce platforms in Indonesia “remained immaterial” to the small business.

In 2022 and the 1st six months of this yr, profits from social e-commerce platforms in Indonesia contributed only 4% and 6% to the company’s profits respectively, explained J&T.

“We imagine that while [the new e-commerce regulation] may well have an affect on our client composition in Indonesia in the around time period, this new regulation will not have a product adverse effect on our business operations and financial performance in the prolonged time period.”