HONG KONG, Sept 21 (Reuters) - China’s Best Inc, flush with $450 million from a U.S. initial public offering (IPO), is broadening its scope in so-called last-mile logistics in China as a key strand of its growth strategy, its chief executive told Reuters.
Best, backed by e-commerce firm Alibaba Group Holding Ltd , plans to use its IPO windfall to add to its 315,000 convenience stores that can both accept and distribute packages from and to individuals, Johnny Chou said in an interview.
Best, like peers such as ZTO Express Inc, is capitalising on a surge in demand for logistics services fuelled by an e-commerce boom, particularly in China but also in the populous and fast-growing region of Southeast Asia.
“Last-mile services are an essential and firm part of our strategy,” Chou said, noting that many logistics firms deliver between distribution centres and not to addressees.
Best debuted on the New York Stock Exchange on Wednesday, with its stock rising as much as 19 percent above its IPO price before closing up 5.2 percent. Chou said Best is not concerned about short-term stock valuation, but the first-day gains were good to reward investors who bought into Best’s future.
“At the end of the day, it’s a moment in time. We have a plan and it’s working out,” Chou said.
As well as China, Best has warehouses in the U.S. states of California and Delaware, plus Canada, Australia, Germany and Japan. It aims to use its experience buying smaller logistics peers and warehouse robotics firms to grow its business and expand into new areas as well as markets such as Southeast Asia.
“It’s a market with great potential, with a large population, and e-commerce growth is very high; and with very fragmented supply chain and logistics services,” Chou said. “We will get into this market.”
Best initially targeted an IPO worth up to $932 million, but slashed the number and price of shares on sale due to limited interest from investors burned by the underperformance of comparable IPOs and unease over Best’s valuation.
The IPO was nevertheless the biggest by a Chinese firm in the United States since ZTO raised $1.4 billion in October. ZTO’s stock has traded below its IPO price since debuting and is currently down 23 percent.
“We looked where we are now – at an inflection (point) – with margins improving and everything improving, we thought with the advisors that the initial range we had set was very reasonable,” Chou said.
“People believe in our future and vision, but they want to make sure that in investing they will see the returns. We want them to back us up and we want them to be our long-term partners. That’s why we changed (the price range).”
Reporting by Elzio Barreto; Editing by Christopher Cushing