As Bairong falls 16% on debut, all eyes on Linklogis IPO and fintech players

With Bairong’s shares slumping up to 16% on debut last week, one might start wondering if the global sell-off in China fintech stocks is far from over. Even the shares of popular video sharing portal, Bilibili traded at a slight discount at market close on the first day of its secondary Hong Kong listing. The decline in technology shares follows a massive $30 billion liquidation of US and China tech stocks related to margin calls defaults by investment firm, Archegos Capital Management, as well as announcement by US regulators to adopt the Holding Foreign Companies Accountable Act, which basically requires US listed Chinese companies to come clean on their ultimate shareholding structure or be delisted. Last year, China also pulled the plug on Ant Financial’s IPO, which many said was an initiative by authorities to further regulate the fintech and broader banking space.


Talk about bad timing.

If the lacklustre IPOs of Bairong and Bilibili are harbingers of what to expect in the fintech and tech industry, then investors will want to watch the upcoming Linklogis IPO closely. Unlike Bairong which offers more consumer-focused products, Linklogis operates within the B2B supply chain space. Both however are technology service providers, boasting the application of advanced and cutting-edge capabilities such as “artificial intelligence (AI)”, “big data”, “complex algorithms”, “natural language processing (NLP)” or “blockchain”.

Is AI, blockchain and cloud technology a real differentiator?


The “ABCs” of today’s Internet economy – AI, Blockchain and Cloud – have been increasingly embraced as the new normal by major global economies, even within the banking and insurance space. To a certain extent, it has even become a benchmark of being ahead of the curve, partly attributed to how these are portrayed in the media and the endorsements of influential industry players.

In 2017, a little-known US based beverage company’s value rebranded itself to focus on fintech, resulting in its share price increasing by over 200% overnight. In that same year, another British company also added the word “Blockchain” to its corporate name and saw its share price skyrocketing 400% although they were simply just investors in internet and information businesses.

These are certainly more extreme and sensational examples, but the point here is that this jargon seems overly used as a means to increase the market value of businesses dramatically or obfuscate their underlying business models.


These days the keywords: “AI”, “Blockchain” or “Cloud” can almost always be found in the corporate presentation decks of any fintech company. These are great technologies for any business operating in the digital economy, but do they necessarily create a competitive moat? The key question remains: Beyond the nice-looking charts and jargon, are investors saavy enough to evaluate a company based on its fundamentals and long-term outlook?

Looking beyond the fintech frenzy


Amidst the trading frenzy in fintech stocks and the anticipation of the upcoming Linklogis IPO, one company in the fintech space seems to have been cruising along quietly under the radar.


Sheng Ye Capital, a Shenzhen-based, Hong Kong listed fintech company that operates within the supply chain space has recently also pivoted to focusing on deepening its technology leadership with its Dual-Engine, One-Platform initiative announced earlier this year. Like Linklogis, Sheng Ye Capital uses AI-powered technologies such as NLP and optical character recognition on its platform. According to its corporate presentation, the company even uses a cloud-based video surveillance system installed on construction sites to verify underlying financial transactions.

Yet, although Linklogis and Sheng Ye Capital both co-exist in the supply chain sector, their business models are essentially quite different. Linklogis is a Software-as-a-Service (“SaaS”) service provider. Its revenue model is largely based on offering a full stack solution to optimize the workflow for supply chain financing and payments. Sheng Ye Capital offers SaaS solutions as well, but processes the data acquired, turning it into actionable insights to provide customized factoring solutions.


Given the take-rates of the SaaS market, Linklogis relies on a volume-based model with a large spread of anchor enterprises and financial institutions. The competitive landscape is incredibly cutthroat, given that most of the underlying technology used in enterprise software systems aren’t exactly rocket science. Sheng Ye Capital however, derives its profit from the spread between the interest rates charged to clients over its cost of funds, and leverages its loan book for providing factoring services mainly to SMEs. In Linklogis’ case, the concept of a loan book is irrelevant as they do not partake in the financial risks relating to supply chain financing activities.

Loan book aside, both companies also differ also in terms of the sectors they focus on. Based on Linklogis’ prospectus, the company serves “anchor enterprises” in several broad areas including “real estate, energy, construction, pharmaceutical, manufacturing, among others”. Sheng Ye Capital on the other hand has chosen to focus on three industries: infrastructure, medical and energy. While there are benefits in sector diversification, Sheng Ye Capital’s apparently narrow focus is a reflection of the resilience in these three sectors and its strategic value to China’s economic growth and stability. More importantly perhaps, is the company’s experience in these sectors and the ability to effectively navigate the nuances on the ground. All these factors, augmented with its platform data analytics, make up its proprietary credit and risk management framework.

Given the current excitement in the tech space and Linklogis’ billion-dollar offering, it would be surprising to see Sheng Ye Capital go unnoticed given the company’s somewhat similar SaaS platform, its 40-50% net profit margin and impressive user growth rates demonstrated over the past four years.

Huge market potential in China’s fintech and supply chain market

Notwithstanding the heightened domestic regulatory scrutiny and geopolitical overhang of China tech stocks listed in the US, the outlook for fintech and industrial digitalization should remain bright. In China’s recent “Two Sessions”, the government has also reiterated its support and push for further innovation and digitalization.

Any business with a China presence understands and appreciates the tremendous growth potential of a policy-backed industrial digitalization. The benefits of this are also clear: Even with the brutal impact of the pandemic in 2020, thanks to the prioritization of digital connectivity, support for the SME segment and the progressive rollout of infrastructure development over the years, China was probably the only country globally to have registered growth in 2020 based on data from the IMF.

Behind this engine of growth is the government’s relentless support for the economy. According to a report by Moody’s, one of the key focus areas following the onset of the coronavirus was to develop “new infrastructure”, “upgrade manufacturing industries” and “develop advanced technologies”. The total investment earmarked for this massive initiative was estimated to be RMB 43 trillion, representing about half of the country’s annual GDP.

The pandemic has also accelerated the adoption of technology in many enterprises across China and transform the way finance and banking is being done in the B2B space. This demand, coupled with strong government support, is expected to continue fueling growth in the sector, benefiting all players across the supply chain financing ecosystem.

The debut of Linklogis on the Hong Kong Exchange could just be the start of an increasing interest in China’s supply chain and industrial fintech space as investors seek new growth opportunities beyond the already pricey and popular household technology giants.

The author is a founding partner and director of cross-border investment and advisory firm, IJK Capital Partners.

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