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source from：WSJ
MARKETS HEARD ON THE STREET
S.F. Express Needs UPS Tie-Up to Deliver
China’s biggest package-delivery company is expanding overseas by tying up with UPS
Costly package.
Costly package. PHOTO: ANTHONY KWAN/BLOOMBERG NEWS
By Jacky Wong
May 29, 2017 12:57 a.m. ET
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One of the biggest Chinese companies you’ve never heard of wants to expand its U.S. presence. S.F. Express, a Shenzhen-listed package delivery company worth $34 billion, is forming a joint venture with United Parcel Service. The strategy looks right, but deals like these will have to go very well for S.F. Express to justify its eye-watering valuation.
S.F. Express’s move overseas might look odd. The package-delivery market in China has been on fire, as ever more people shop online. More than 30 billion express parcels were sent in China last year, official data show, 51% more than in 2015.
But in April the growth rate was just half that, and rising labor costs and intense competition are squeezing margins. China’s package-delivery market is highly fragmented, with companies often outsourcing the labor-intensive “last mile” to local franchisees.
Under Chairman Wang Wei, China’s fifth-richest man, S.F. Express has taken a different approach by owning the whole delivery network, much as UPS UPS -0.07% does, and focusing on premium segments like delivering high-value items. That helps the company generate around $3.20 per package sent, around 10 times what its New York-listed local rival ZTO Express earns. Teaming up with UPS will allow S.F. Express to expand in the still-more-lucrative international delivery market: UPS made $28.10 per cross-border package delivery last quarter.
Still, at 53 times trailing earnings, S.F. Express’s valuation is twice that of UPS. Its market value is only 20% less than that of DHL owner Deutsche Post , whose profit is five times as large. S.F. has found the right route, but it has much to do to deliver on its shareholders’ expectations.
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