Tue, Mar 07, 2017 - Page 9 News List

Chinese parcel billionaires amass US$47 billion net worth

Chinese delivery companies are reaping the benefits of an explosion in online shopping fueled by Alibaba, which accounts for up to 70 percent of the distributions

By Jill Mao  /  Bloomberg

Illustration: Yusha

Shuttling parcels around for Alibaba and other retailers is creating China’s latest wealth explosion, with a surge in S.F. Express shares making Wang Wei (王衛) the country’s third-richest man.

It is a stark reversal for a company that got its start in what Wang has called the sneaky business of “black delivery,” back in the 1990s when only China’s post office was allowed to handle packages. The courier company he created navigated the shadows of the border between China and Hong Kong for 16 years until the government gave its sanction.

Last week’s official launch of S.F. Express’ so-called backdoor listing on the Shenzhen Stock Exchange, approved in December last year and pushed through rapidly with government support, helped produce a 59 percent surge in parent S.F. Holding Co shares, giving Wang a net worth US$27.6 billion on the Bloomberg Billionaires Index at the close of trading in New York on Tuesday last week. His fortune added another US$1 billion during Wednesday trading in China.

The Friday launch coincided with a bonus awarded to S.F. employees by Wang himself the same day, which many used to buy company shares. These purchases contributed to the dramatic rise in the share price, in part due to the relatively small amount of outstanding shares being traded.

Wang and five other package delivery billionaires, including the founder of ZTO Express Inc, which debuted on the New York Stock Exchange in October last year, have seen their fortunes swell based on listings in the past five months alone, amassing a combined wealth of about US$47 billion, the index shows.

They are all part of the online shopping boom led by Alibaba Group Holding Ltd, with Wang’s S.F. Express the leader by revenue ahead of hundreds of competitors.

That they all sought money in capital markets in such a short period, most using the quicker route of so-called backdoor listings instead of initial public offerings (IPOs), points to an underlying tension: With business surging, competitors are piling in, driving down profit margins and setting up the industry for consolidation to just two or three key players — like FedEx Corp, United Parcel Service Inc and DHL Express elsewhere. The race to raise money and expand into China’s smaller cities will determine which companies survive the eventual shakeout.

“The industry has passed the first phase of vigorous growth,” said Su Baoliang (蘇寶亮), a Beijing-based analyst at Sinolink Securities Co, who estimated revenue growth will slow to 15 percent in the next two to three years from its current rate of 40 percent. “Companies have to enhance operational efficiency. Otherwise they will be either marginalized or acquired by competitors.”

Yet Chinese companies are also counting on opportunity — on Jack Ma (馬雲) of Alibaba and his promise to US President Donald Trump to create US jobs by linking 1 million US small businesses with Chinese buyers. That is a lot of potential deliveries.

“Not only the past decade, but the next few years will also be a golden age for Chinese couriers’ development,” said John Song (宋旭軍), a Shanghai-based director of the logistics and transportation practice in China at consultancy firm Deloitte. “There is huge potential in the development of these Chinese couriers.”

After not even permitting private delivery services until 2009, the Chinese government has since been encouraging competition and fostering consolidation. In the past decade, due to decreasing operational costs combined with more entrants piling in, the average price of delivering a package dropped 57 percent to 12.8 yuan (USUS$1.86), according to the Chinese State Post Bureau, which regulates postal services.

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