J&T Express IPO: Shares Fall 1.33% on First Day of Trading in Hong Kong

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J&T Express Shares Fall on First Day of Trading

Shares of Indonesia’s logistics service provider, J&T Express, dropped by 1.33% when it went public on Friday. The company’s stock traded at HK$11.84 on its first day of trading in Hong Kong, down from its opening price of HK$12. Despite the decline, J&T Express’s initial public offering (IPO) of HK$3.92 billion ($500 million) is the second largest listing in Hong Kong this year. The largest IPO in Hong Kong this year was by Chinese liquor company ZJLD Group, which experienced an 18% drop on its first day of trading.

Investors and Market Conditions

Investors in J&T Express include Tencent, Sequoia, Boyu, SF Express, and Temasek. The company’s IPO comes at a time of economic uncertainty, marked by high inflation, interest rates, and global conflicts such as the Israel-Hamas war and Ukraine invasion. The IPO market has been slow due to these macroeconomic and geopolitical uncertainties, with Hong Kong’s global IPO ranking dropping to eighth place in the third quarter of 2023.

Challenges and Adjustments in IPO Pricing

J&T Express initially aimed to raise at least $1 billion in its IPO but had to halve the target amount due to weak investor demand. This reflects a trend among companies going public to be more realistic in their pricing. According to EY’s Asia-Pacific IPO leader, IPO pricing has dropped significantly by more than 50% or even 70%.

China as J&T’s Largest Market

China is J&T Express’s biggest market, accounting for nearly 83% of its total parcels delivered in 2022. The company serves major e-commerce players in China, including Pinduoduo, Alibaba’s Taobao and Tmall. J&T Express acquired China-based Fengwang Express in May 2022 and has seen parcel volumes increase in both China and Southeast Asia. In Southeast Asia, the company holds a 22.5% market share in terms of parcel volume.

Financial Performance and Future Plans

In 2022, J&T Express reported a net profit of $1.57 billion. However, the company faced net losses of $666.8 million in the first half of this year due to various factors, including losses from operations in China and new market expansion. To achieve profitability, J&T Express plans to grow its parcel volume and market share, implement flexible pricing strategies, control costs, improve gross margin, and enhance operating leverage.

Potential Impact of TikTok Shop Ban

Analysts have raised concerns about the ban on TikTok Shop in Indonesia, which prohibits social media platforms from facilitating e-commerce purchases. J&T Express was a major carrier for TikTok Shop’s orders in Indonesia prior to the ban. However, J&T Express stated that the revenue from social e-commerce platforms in Indonesia is not significant to its business. While the new e-commerce regulation may affect the company’s customer composition in the short term, J&T Express believes it will not have a material adverse effect on its long-term business operations and financial performance.

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