Guangzhou-based China Southern Air Holding is considering listing China Southern Air Cargo (CZ, Guangzhou) on the Hong Kong Stock Exchange (HKEX), according to Bloomberg. The IPO could raise "hundreds of millions of dollars" but comes hot on the heels of abandoning a planned listing on the Shanghai Stock Exchange and as the US and China engage in a high-stakes trade war.
Citing sources not authorised to speak publicly, the report says the Hong Kong IPO talks remain in the preliminary stages. In February, China Southern Air Cargo, also known as China Southern Airlines Logistics, withdrew its application to list on the Shanghai bourse.
At the time, majority shareholder and China Southern Air Holding subsidiary China Southern Airlines (CZ, Guangzhou) said the decision was due to current market conditions and capital requirements. However, as reported in ch-aviation, Chinese regulations require A-share listed companies such as China Southern Airlines to be profitable for at least three consecutive years before they can spin off subsidiaries. China Southern Airlines posted losses in fiscal 2022, 2023, and is expected to post a loss in fiscal 2024, ruling it ineligible.
Typically, the HKEX requires a company to show consistent profitability before it can list subsidiaries. This includes recording a profit of at least HKD35 million Hong Kong dollars (USD4.5 million) in the previous year and cumulative profits of at least HKD45 million (USD5.8 million) over the last two years. However, if a company cannot meet this profitability test, it can still be eligible if it satisfies other tests, such as market capitalisation, revenue, and/or cash flow.
