QEX Logistics shares jumped 80% on their debut to the small-cap NXT market in the first new listing of 2018.
The shares joined the NXT market, most likely consigned to the dustbin if NZX goes ahead with plans to merge its three equity bourses, in a compliance listing today priced at 25c apiece. The stock first traded at 45c and was recently at 39.5c, a 58% premium and valuing the company at $19.9 million.
The cross-border logistics company facilitates the storage, supply, packaging, customs clearance and delivery of New Zealand products bought from stores, online and e-commerce sites by consumers in China.
The company has a total of 50,300,000 shares on issue and a market capitalisation of $12.5 million on listing.
Addressing founders Ronnie Xue and his wife Doreen Wu at the listing today, NZX chief executive Mark Peterson highlighted the importance of QEX's role in connecting New Zealand to Asia.
“The services and products that QEX Logistics provide are highly sought after and the growth of the business has been rapid," Mr Peterson says.
The business was founded in the garage of Mr Xue and Mrs Wu in 2010. In 2016, it made No 42 on the Deloitte Fast 50 rankings, rising to number 13 in 2017.
QEX, which raised $2.575 million from New Zealand investors ahead of listing, made a net profit of $1.87 million in its last financial year. It's targeting raising revenue to $26 million in the year to March 31 from $22 milion the previous year.
QEX chairman Conor English says the company has achieved targets eight years in a row, and he expects that to continue now that the company is listed on the NXT.
"We have a very good management team and a good board. We expect that we will achieve the targets we have set out.
The company, which trades as New Y in New Zealand, is “growing dramatically”, Mr Xue says.
“Soon after we started QEX we realised the demand was significant.
“We are ambitious, we have big ideas and we have big plans.
“New Zealand’s clean and green image has huge significance in China. Our customers want to know the products they are using are trustworthy. By buying from us they have the assurance.”
The company formed its Australian subsidiary in October and plans to put an operations team in Melbourne this year. It recently signed a contract with a major Australasian supermarket, which is expanding its digital sales distribution platform.
China is New Zealand’s biggest market for goods exports, with more than $9.4 billion being shipped in 2016. Milk powder and dairy products make up more than a quarter of the market.
QEX started off delivering infant formula to Chinese consumers but China then began tightening its grey market and New Zealand was improving its regulatory environment.
The company was the first cross-border logistics company in New Zealand to get risk management programme (RMP) certification, which offers traceability of the product.
There is plenty of competition – including NZ Post and various Chinese couriers – but Mr Xue says QEX has lower fees, better traceability and contacts on the ground in China.
It bought Shanghai Ditu International Freight Forwarders last year, which now operates QEX’s Chinese-based commercial operations.
The company, which flies parcels daily to China, has branched into delivering healthcare products, with 50% of revenue derived from products other than infant formula.
Why list now?
Mr Xue hopes listing will boost the company’s profile and open opportunities to raise capital.
The company plans to acquire complementary businesses, increase local logistics and freight forwarding services and the variety of products it ships, and increase the size of its warehousing facilities.
He is not concerned about NZX’s plan to scrap the NXT board by the fourth quarter, as he understands the company will migrate if the stock exchange operator merges its three boards into one.
"The NXT still provides an opportunity for us. We’re a very fast-growing company and we want to enter the NZX main board as soon as possible.”
The company, which trades under the ticker QEX, will look at dual-listing on the ASX in future, he says.
The NXT, which launched in June 2015 and came out of the Capital Markets Development Taskforce, has not been a successful experiment for the NZX.
The board offers less onerous market rules designed to ease the cost of small-to-medium sized enterprises listing but failed to find support, with just four companies listing on it (and G3 Group delisted in October).
The three remaining companies – Oceania Natural, Snakk Media and Marlborough Wine – have been dogged by target downgrades, widening losses and dwindling capital.
There were no listings on the NXT board last year. On the main board, there was just one IPO for Oceania Healthcare, a backdoor listing for Til Logistics, and eight delistings, driven by takeovers and insolvencies.
NZX’s preferred option is to have one set of rules to govern all issuers on one board but varying standards for smaller issuers. Consultations with the market are under way and will influence the final outcome.
RELATED VIDEO: NZX chief executive Mark Peterson talks about the stock exchange's plan to grow the capital markets (Jun 16)
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