SF Holding’s acquisition to boost Thailand’s delivery services sector

The delivery services sector in Thailand is set to experience a surge in competition following SF Holding’s acquisition of shares in Kerry Express (Thailand). The move is poised to equip Kerry Express with a wider range of services and the potential for greater application of artificial intelligence (AI) technology, thereby boosting its competitive position.

Shippop, a logistics aggregator, anticipates a continued growth of the express parcel delivery market in Thailand until 2024, driven by the array of online selling platforms and the consumer trend towards online purchases. Consequently, the market’s value is expected to surpass 100 billion baht (US$2.9 billion) by the end of 2024, marking a 12% increase from 2023. The market value for 2023 is forecasted to reach 96 billion baht, a 13% increase from 2022.

On January 2, Kerry Express notified the Stock Exchange of Thailand about a potential change in its major shareholders’ list. Kerry Logistics Network Limited (KLN), which indirectly holds a 49% stake in Kerry Express (Thailand), intends to distribute 52.1% of all issued Kerry Express shares as a special interim dividend to its entitled shareholders through a distribution in specie (DIS).

SF International Holding (Thailand) Co (SFTH), currently a holder of 1,000 shares in Kerry Express, is set to acquire another 467,373,855 shares from Flourish Harmony Holdings Co, a KLN shareholder. Consequently, SFTH will hold 26.8% of all issued Kerry Express shares and is required to make a mandatory tender offer to acquire all of the company’s issued shares.

Following the transaction’s completion, KLN will no longer own any Kerry shares, leading to a change in the company’s shareholding structure, reported Bangkok Post.

Alex Ng, chief executive of Kerry Express (Thailand), sees the development as a positive move, given SF’s regional dominance as an express company focusing on tech and excellent services. The tech extends from AI technology for route optimisation to order management systems, parcel carriage and sorting technologies, and user applications.

Consumer interest

SF’s business model, which is not solely reliant on e-commerce customers, but also on general consumers and business parcels, will provide Kerry Express with a global network of international parcels.

For the first nine months of 2023, Kerry Express reported revenue and service offerings standing at 8.9 billion baht (US$259 million), a 30.7% decrease compared to the same period in 2022. This decline has been attributed to a reduction in parcel delivery volume, particularly from its e-commerce partners, due to stiff competition in the e-commerce delivery market.

To enhance operational efficiency, the company implemented a system in 2022 that leverages shareholder assistance. It has been strategically segmenting its operations, targeting users at various levels, from general consumers to high-level users and industrial users.

These user groups present significant revenue and parcel delivery volume potential. The company continues to improve its service quality to meet these user groups’ needs and increase revenue per parcel in line with its corporate objectives.

For the first nine months of 2023, Kerry Express reported a net loss attributable to the company’s owners of 2.72 billion, a 43.6% wider loss compared to the corresponding period in 2022. The company aims to achieve profitability in 2024.

An analyst at UOB Kay Hian Securities revealed that SF Holding, the new major shareholder of Kerry Express, will conduct the tender offer for Kerry Express’s shares at 5.50 baht (US$0.16) per share. This price is 11% higher than the market price of 4.94 baht (US$0.13) as of December 28 and 24% higher than the analyst’s target price of 4.45 baht (US$0.13).

Kerry Express’s shares closed at 5.95 baht (US$0.17) on the Stock Exchange of Thailand at midday on Tuesday, up 20.4% in trade worth 304.9 million baht (US$8.9 million).

Following the transaction, KLN will no longer hold shares in Kerry Express, with SF Holding becoming the major shareholder. Consequently, SF Holding will be required to make a tender offer for all of Kerry Express’s shares at the agreed price of 5.50 baht. SF Holding, however, has no plans to delist Kerry Express from the SET within 12 months unless mandated by law, rules and regulations.