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China Postal plans to go public

By Liang Fei  (Global Times)

08:14, May 03, 2012

China Postal Express & Logistics Co, a unit of the State-owned China Post Group, is planning to raise up to 9.98 billion yuan ($1.58 billion) in an initial public offering (IPO) in Shanghai, and analysts said yesterday that if the company's IPO gets approved, more companies in the sector will follow suit.

The IPO plan comes at a time when the country's securities regulator is speeding up the reform of the IPO approval system. The China Postal's IPO plan will be reviewed by the China Securities Regulatory Commission (CSRC) tomorrow.

If approved, it would be the biggest IPO in the domestic capital market so far this year, topping China Communications Construction Co's 5 billion yuan listing in February and the yet-to-be-approved 6.06 billion yuan offering by Huaibei Mining Co.

"China Postal stands a good chance of receiving approval from the CSRC, given the company's leading position and also the government's supporting policies to push public offerings in the sector," Zhang Ya'nan, an analyst with research company Zero2IPO Group, told the Global Times yesterday.

The company plans to issue up to 4 billion shares in the IPO, and the funds will be used to pay for the expansion of distribution centers and warehousing facilities.

The IPO will make China Postal Express & Logistics the first logistics stock in the domestic capital market, and Zhang believes that the company's stock is very likely to perform well in the IPO as investors may think it is less risky to invest in a company with State background.

Gao Boxuan, an industry analyst with the CIC Industry Research Center, said that despite the annual growth of more than 30 percent, the sector is suffering from rising costs, and an IPO is helpful for the courier companies to get funding for their future development.

"More IPOs would be seen in the sector after the China Postal Express & Logistics' listing," said Gao.

In 2011, the logistics company reported net profits of 901.72 million yuan, up 80 percent year-on-year. In the domestic courier sector, it has topped other courier companies with 29.46 percent share.

The State-owned company is also facing growing competition from privately owned companies. Currently, China has more than 7,500 courier firms, among which privately owned S.F. Express boasts annual sales of more than 10 billion yuan.

"China Postal Express & Logistics' public offering can help the company to further consolidate its leading position in the sector," said Gao.

But Zhang noted that the company's IPO still faces uncertainties.

China Communication Construction Co cut the size of its Shanghai IPO by 75 percent to 5 billion yuan in January, due to gloomy market conditions.

"It is very likely China Postal will face a similar scenario as the market continues to remain sluggish," said Zhang.

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