China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

<p><br><strong>IPO of Beijing-Shanghai High Speed Railway Co was approved last month, which we consider to be a good start for China Railway to introduce funding/resources from the capital markets. According to China State Railway Group (CSRG), more subsidiaries would apply for IPO in the near term, China Railway Special Cargo Services Co might be next.</strong></p><div><strong>In addition, local governments start restructuring local railway investment platforms for better financing, building and operating local railway networks. In the past one year, this has been done in Shandong, Gansu, Jiangsu, Guandong and Guangxi.</strong></div><div></div><div><strong>The two factors -  the introduction of capital market funding and local rail investment groups - together are decentralising CSRG's responsibility of the overall railway network financing, building and operating. As a result, rail companies, including CRRC (<a href="http://1766.hk/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://1766.hk/&amp;source=gmail&amp;ust=1576332947492000&amp;usg=AFQjCNH3FQaBnjUfsluwVmBivYIHSy78Dg" rel="noopener">1766.HK</a>),CRCC(<a href="http://1186.hk/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://1186.hk/&amp;source=gmail&amp;ust=1576332947492000&amp;usg=AFQjCNGnxuammuSZUZFu7N7eoawZysPvPA" rel="noopener">1186.HK</a>), and CRG (<a href="http://390.hk/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://390.hk/&amp;source=gmail&amp;ust=1576332947492000&amp;usg=AFQjCNELU13N7G8kBF3kttNx8VlKjrIHtQ" rel="noopener">390.HK</a>), would have better visibility of order flows, in our view. This bis because 1) with reduced reliance on single company (CSRG), planned regional rail projects would most likely proceed as scheduled; 2) some regional projects could be important enough for local officers to provide maximum support to beat schedules.</strong></div>

 IPO of Beijing-Shanghai High Speed Railway Co was approved last month, which we consider to be a good start for China Railway to introduce funding/resources from the capital markets. According to China State Railway Group (CSRG), more subsidiaries would apply for IPO in the near term, China Railway Special Cargo Services Co might be next.In addition, local governments start restructuring local railway investment platforms for better financing, building and operating local railway networks. In the past one year, this has been done in Shandong, Gansu, Jiangsu, Guandong and Guangxi.The two factors -  the introduction of capital market funding and local rail investment groups - together are decentralising CSRG's responsibility of the overall railway network financing, building and operating. As a result, rail companies, including CRRC (1766.HK),CRCC(1186.HK), and CRG (390.HK), would have better visibility of order flows, in our view. This bis because 1) with reduced reliance on single company (CSRG), planned regional rail projects would most likely proceed as scheduled; 2) some regional projects could be important enough for local officers to provide maximum support to beat schedules.

China Rail: Implications of the Beijing-Shanghai High Speed Railway IPO

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Capital Markets

Beijing-Shanghai High Speed Ra / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/beijing-shanghai-high-speed-railway" target="_blank" data-smartkarma-citation="entities:28433:1" rel="noopener">Beijing-Shanghai High Speed Railway (1762168D CH)</a>, BSHR, is seeking an IPO in the Shanghai Stock Exchange. BSHR is the sole investor, developer and operator of the Beijing-Shanghai high speed railway which carried 192m passengers and achieved a profit of RMB10.2bn in FY18. The company plans to deploy the IPO proceeds to satisfy part of the RMB50bn consideration for its proposed acquisition of a 65.0759% stake in Beijing-Fuzhou Railway Anhui Company. </p><p>Key positives are: 1.) established franchise with high and rising market share; 2.) growing profitability as it links Beijing and Shanghai; 3.) position as the key high speed railway investor; and 4.) first high speed railway listing with huge market capitalisation.</p><p>Key negatives are: 1.) non-operator using entrusted management arrangement; 2.) limited pricing autonomy to offset rising costs; 3.) acquisition of loss-making Beijing-Fuzhou Railway Anhui Co., Ltd; and 4.) potential competition from the second Beijing-Shanghai high speed railway.</p>

Beijing-Shanghai High Speed Railway (1762168D CH), BSHR, is seeking an IPO in the Shanghai Stock Exchange. BSHR is the sole investor, developer and operator of the Beijing-Shanghai high speed railway which carried 192m passengers and achieved a profit of RMB10.2bn in FY18. The company plans to deploy the IPO proceeds to satisfy part of the RMB50bn consideration for its proposed acquisition of a 65.0759% stake in Beijing-Fuzhou Railway Anhui Company. Key positives are: 1.) established franchise with high and rising market share; 2.) growing profitability as it links Beijing and Shanghai; 3.) position as the key high speed railway investor; and 4.) first high speed railway listing with huge market capitalisation.Key negatives are: 1.) non-operator using entrusted management arrangement; 2.) limited pricing autonomy to offset rising costs; 3.) acquisition of loss-making Beijing-Fuzhou Railway Anhui Co., Ltd; and 4.) potential competition from the second Beijing-Shanghai high speed railway.

Beijing-Shanghai High Speed Railway IPO: Initial Thoughts on the A-Share Listing

China

Beijing-Shanghai High Speed Railway Co., Ltd. provides railway operation services. The Company offers high-speed railway and stations investment, construction, operation, and other services. Beijing-Shanghai High Speed Railway provides services in China.

Beijing-Shanghai High Speed Ra (601816 CH)

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China Rail: Implications of the Beijing-Shanghai High Speed Railway IPO

IPO of Beijing-Shanghai High Speed Railway Co was approved last month, which we consider to be a good start for China Railway to introduce...

Victoria Li

Beijing-Shanghai High Speed Railway IPO: Initial Thoughts on the A-Share Listing

Beijing-Shanghai High Speed Railway (1762168D CH), BSHR, is seeking an IPO in the Shanghai Stock Exchange. BSHR is the sole investor, developer and...

Osbert Tang, CFA