True value of trust in newly listed SF Express remains to be seen

Cargo aircrafts of SF Express at an airport in Shenzhen, Guangdong province, Jan 30, 2015. [Photo/VCG]

THE DOMESTIC EXPRESS DELIVERY COMPANY SF EXPRESS was listed on the Shenzhen Stock Exchange last Thursday. On each of the first four trading days, its stock had risen by the daily limit, thus making the company's founder and chairperson Wang Wei extremely wealthy. Beijing News on Thursday comments:

Wang Wei must be very happy. The share price of SF Express has risen so much that by Wednesday, its total market value reached 310 billion yuan ($45 billion), of which 180 billion yuan belongs to him. If the trend continues, Wang might soon be the richest person in China.

That has much to do with the growth potential of the company. The price of a company's shares shows the market's trust in its future growth. The more investors trust it, the more they will rush to buy its shares, which in turn pushes its share price higher. SF Express has huge growth potential and investors trust that it will continue to grow.

However, it remains to be seen whether such trust is worth 310 billion yuan.

On Tuesday, SF Express announced a draft plan for the allocation of its 2016 profits, according to which it will pay 1 yuan for every 10 shares, which will be 418 million yuan in all. That means the shareholders of SF Express will make 1 yuan for every 668 yuan of shares they hold.

By comparison, the current interest rate of bank deposits is much higher. Therefore it is easy to conclude the enthusiasm of many investors for SF Express will fade, maybe quite soon.

But that's not necessarily bad news for SF Express. Share prices have their ups and downs; it is the true value of the company that is important. Even if its stock prices fall in the future, SF Express can still be a success in the market as long as it concentrates on doing its job and serving its customers well.

The true challenge facing SF Express is the fierce competition in the domestic and overseas markets. How to distinguish its services from its competitors will be the main task of SF Express if it hopes to continue to prosper.