Post Office Delivers Attractive IPO 中邮速递推进IPO 或将受热捧

By newsdoug on May 7, 2012

UnionPay in new e-commerce initiative After months of seeing a steady stream of lackluster IPOs go to market, often with lukewarm or disastrous receptions, I’m finally happy to report the year’s first truly exciting new offering coming from the courier unit of China’s post office, which could be followed later in the year by another exciting listing for UnionPay, operator of the nation’s dominant electronic money transferring network. Let’s look first at the upcoming offering for China Postal Express, the package delivery unit of China Post, which has filed for a Shanghai listing to raise up to $1.6 billion. (English article) Reports of this offering first came out late last year, which looks like a smart way for investors to buy into China’s booming e-commerce story. (previous post) Financial details in China Postal Express’ IPO prospectus are few, but the broader industry data show China’s e-commerce market is now worth around $100 billion annually, translating to more than 1 billion small packages that must be shipped each year to buyers scattered around the country. As China’s biggest delivery service with a network covering the entire country, China Post is in a great position to capture a big portion of this e-commerce delivery business, and I suspect its own courier business is now highly profitable. Key risks are the cutthroat competition in the space that has driven many smaller couriers into the red, as well as China Posts’ own history as a state-owned entity that means it may lack many of the entrepreneurial instincts needed to become China’s next equivalent of UPS (NYSE: UPS) or FedEx (NYSE: FDX). But despite those risks, this certainly looks like the most exciting IPO we’ve seen so far this year, and I would expect demand to be high. Meantime, media are reporting that UnionPay, operator of an electronic money transfer network similar to Visa’s (NYSE: V) Plus network, is gearing up for its own big drive into the e-commerce space, with plans to launch a rewards system aimed at getting more people to use its online payments service over rivals like Alibaba’s AliPay or eBay’s (Nasdaq: EBAY) Paypal. (Chinese article) News of this plan is just the latest high profile move by UnionPay, which has the enviable advantage of counting most of the nation’s major banks as its shareholders. In previous months, we’ve seen UnionPay announce a string of other strategic moves and information, including an aggressive campaign to expand its network overseas and the recent release of some operating numbers which show its profit has exploded in recent years. (previous post) What’s more, there’s every reason to believe that UnionPay’s big bank shareholders would like to cash out some of their investment in the near future as part of their bid to strengthen their capital bases weakened by several years of binge lending under China’s economic stimulus plan of 2009 and 2010. All those factors lead me to strongly suspect that UnionPay is moving towards its own IPO, most likely a dual listing in Hong Kong and Shanghai, which could come sometime in the second half of the year. If and when that happens, look for the offering to spark even more excitement than this Post Office one, as it offers a solid window into China’s financial services industry without many of the traditional risks of investing in the country’s state-owned banks.

Bottom line: The upcoming IPO by the courier arm of China’s post office should get strong demand as a good e-commerce play, while UnionPay also looks to be moving closer to another exciting IPO.

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