Presentation Transcript

1. August 11, 2010
2. Contents Part I – 1st Half 2010 Financial Results and Outlook Financial Performance Outlook Part II – Acquisition of Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd Transaction Overview Target Overview Transaction Rationale Financing Structure & Impact on CMHP Conclusion
3. 1. Financial Performance
4. Financial Highlights Net Profit HK$173 million 7% EPS (basic) 1% 27.54 HK cents EPS (diluted) 20.24 HK cents 7% Free Cash flow HK$317 million 10% Proposed Interim Dividend 2.0 cents
5. Profit & Loss Statement
6. Revenue PBT
7. Balance Sheet Highlights & Key Financial Indicators
8. Free Cash Flow
9. Traffic Volume and Revenue By Toll Road
10. PBT by Toll Road
11. 2. Outlook
12. FY2010 Outlook Toll Road Business Will continue to deliver steady earnings this year. Property Development Business Residential property market in New Zealand remains challenging.
13. Dividend Policy Payout ratio FY2009: 79% FY2008: 55% FY2007: 54% FY2006: 58% FY2005: 64% Dividend per share (Singapore Cents) Company will maintain the target annual dividend payout ratio of at least 50% of CMHP’s net profit after tax for FY2010
14. 3. Transaction Overview
15. Acquisition of ZhejiangWenzhou Yongtaiwen Expressway Co., Ltd Acquisition of a 51% equity stake from China Merchants Group Limited (“CMG”) in Zhejiang Wenzhou Yongtaiwen Expressway Co., Ltd (“Yongtaiwen Expressway Co”) (the “Acquisition”), which owns the rights to operate the 138km Wenzhou Yongtaiwen Expressway (Wenzhou Section) (“Yongtaiwen Expressway”) in Zhejiang Province, PRC Purchase consideration for the 51% equity stake is RMB 2.23 billion (HK$ 2.56 billion) while the independent valuer's (Savills) valuation as at December 31, 2009, is approximately RMB 2.34 billion (HK$ 2.68 billion) CMHP intends to utilise up to approximately HK$1.0 billion of its cash reserve and raise approximately another HK$1.5 billion via a combination of debt and equity to satisfy the purchase consideration for the Acquisition Bank of America Merrill Lynch and DBS Bank are the Joint Financial Advisors to CMHP in respect of the Acquisition Transaction Structure Before After Wenzhou Investment CMG Zhejiang Communications Wenzhou Investment CMHP Zhejiang Communications 34% 51% 15% 34% 51% 15% Yongtaiwen Expressway Co Yongtaiwen Expressway Co Yongtaiwen Expressway Yongtaiwen Expressway
16. Key Approvals Very Substantial Acquisition (VSA): Pursuant to Rule 1006 of the SGX-ST Listing Manual, the Acquisition constitutes a very substantial acquisition for CMHP as defined in Chapter 10 of the SGX-ST Listing Manual Interested Person Transaction (IPT): As China Merchants Group (CMG) is the ultimate holding company of CMHP, the Acquisition also constitutes an interested person transaction under Chapter 9 of the SGX Listing Manual Approvals: CMHP needs to convene an EGM to seek independent shareholders’ approval for the Acquisition CMG and its associates will abstain from voting Independent Directors of CMHP to make recommendation to independent shareholders on the Acquisition Independent Directors will be advised by ANZ Other approvals: Relevant PRC authorities’ approvals and SGX-ST approval for the Acquisition
17. 4. Target Overview
18. Background and Business Overview of Yongtaiwen Expressway Co  Yongtaiwen Expressway Co is a company incorporated in the PRC which owns the rights to operate Yongtaiwen Expressway with a remaining concession period of approximately 20 years Yongtaiwen Expressway is a four-lane carriageway (dual-2) located in Wenzhou Municipality, connecting with Taizhou Municipality in the east and Fujian Province in the west Yongtaiwen Expressway comprises the East Section (length of 63.3km) and the West Section (length of 74.9km). The expressway commenced operations in 2002 and has approximately 20 years remaining in its concession period The profit sharing ratio in Yongtaiwen Expressway Co is determined by the proportionate equity interest held by each equity holder
19. Overview of Wenzhou Yongtaiwen Expressway Co. Ltd Revenue(1) Gross Profit CAGR of 4.9% (RMBmm) (RMBmm) (Margin) Profit Before Tax Net Profit (RMBmm) (Margin) (RMBmm) (Margin) The target asset has shown good revenue and net profit growth over the past 3 years, even during the height of the financial crisis Source: Company announcement
20. 5. Transaction Rationale
21. Enhanced Size and Profitability 1 2 3 4 High Quality of Target Assetwith Stable Fundamentals Strong Heritageand Supportfrom Parent CMG Reasonable Valuation & EPS Accretive Transaction Rationale
22. Toll Road Business Yongtaiwen Expressway - 51.0% (Revenue HK$1,067mm, Profits before Tax HK$471mm, Length 138km, Zhejiang Province, Remaining Concession Period of 20 Years) Guiliu Expressway - 40.0%(Contribution to CMHP Profits before Tax HK$92mm, Length 139km, Guangxi Zhuang, Remaining Concession Period of 14 Years) Guihuang Highway - 60.0% (Contribution to CMHP Profits before Tax HK$135mm, Length 39km, Guizhou Province, Remaining Concession Period of 17 Years) Yuyao Highway - 60.0% (Contribution to CMHP Profits before Tax HK$16mm, Length 96km,Zhejiang Province, Remaining Concession Period of 15 Years) Other Businesses Universal Homes Limited (New Zealand) - 100.0% (Property Development Business) Other Companies(New Zealand and China) - 100.0% (Other Businesses) Post-transaction Profile 1 Post-Transaction Profile Length of Toll Roads Operated Enlarged China Merchants Holdings (Pacific) Limited (Proforma 2009: Revenue HK$1,277mm, Total Length of Toll Roads Operated 412km, Average Toll Road Remaining Concession Period of 16.5 Years) Increase from Acquisition: 50% Average Concession Remaining Increase from Acquisition: 8.6% Source: Company website, Company filings
23. Significant Enhancement in Portfolio Size and Profitability 1 2009 Sales Total Assets Increase from Acquisition: 506% Increase from Acquisition: 181% (1) (1) 2009 Earnings Fully Diluted EPS Increase from Acquisition: 39% Increase from Acquisition: 58% Accretion: 38.8% Accretion: 35.4% (2) (2) The acquisition of the target asset would significantly enhance CMHP’s portfolio size and profitability Source: Company filings (1) Excludes share of associated profit (2) Consideration financed by (i) Plan 1, internal cash (HKD1.0bn) and debt (HKD1.5bn at interest rate of 5.9%), and (ii) Plan 2, internal cash (HKD1.0bn), equity placement (HKD0.6bn - 20% of issued capital placed at SG$0.81 per share) and debt (HK0.9bn at interest rate of 5.9%). Financing terms are illustrative only and may not represent actual terms
24. High Quality of Target Asset 2 Strategically located in Wenzhou Municipality connecting with Taizhou Municipality in the east and Fujian Province in the west Part of China’s National Expressway System connecting Tongjiang of Heilongjiang Province and Sanya of Hainan Province serving the north-south coastal traffic demand One of the major transportation corridors of the highway system in the region, and will benefit substantially from the healthy trend in regional economic and vehicle population growths Compounded annual growth in traffic flow, revenue and profit after tax and minority interests of approximately 9.1%, 4.9% and 5.0% respectively from FY2007 to FY2009 Key Expressway in the Rapidly Developing Zhejiang Province Highlights of the Growth and Strategic Importance of Zhejiang Province GDP growth in average of more than 13% per annum(1) in Zhejiang Province, Wenzhou Municipality, Taizhou Municipality, and Fujian Province, over the period of 2000 to 2009 Total population of about 47 million and GDP of RMB 2.283 trillion in 2009 Vehicle ownership grew in average more than 20% per annum from 2002 to 2008(2) Rapid growth of both the regional economy and vehicle ownership has placed a heavy demand on the transportation infrastructure system (1) Page 9 of Traffic Consultant’s Report - Statistic Year Books of Zhejiang and Fujian Provinces, Wenzhou and Taizhou Municipalities (2) Page 10 of Traffic Consultant’s Report – Statistic Year Books of Zhejiang Province
25. Zhejiang Province Provides for Solid Industry Fundamentals 2 GDP(1) Vehicle Ownership(2) CAGR of 20.7% CAGR of 15.9% Passenger Traffic(3) Freight Volume(3) CAGR of 8.8% CAGR of 6.4% (1) Page 9 of Traffic Consultant’s Report – Statistic Year Books of Zhejiang and Fujian Provinces, Wenzhou and Taizhou Municipalities (2) Page 10 of Traffic Consultant’s Report – Statistic Year Books of Zhejiang Province (3) Page 21 of Traffic Consultant’s Report – Zhejiang Province Statistical Yearbook
26. Stake sold at a 5% discount to Savills’ valuation Reasonable purchase price of the asset can also be seen in the reasonable multiples Savills Price for 51% RMB2,336mm 5% discount Purchase Price for 51% RMB2,230mm Reasonable Valuation & EPS Accretive 3 Reasonable Valuation Financial Impact (FY2009) 2009 Diluted EPS Accretion: 38.8% Accretion: 35.4% 2009A P/E(1) 2009A P/NAV(1) (x) (x) Peer Average: 17.3x Peer Average: 2.0x (1) Source: Company filings and Factset as of August 6, 2010
27. Founded in 1872, the oldest mainland China enterprise operating in Hong Kong with a history of almost 140 years Main business activities cover Hong Kong, China and Southeast Asia Top 10 state-owned enterprise in the PRC 2009 annual profit of RMB17.3bn with a year-over-year increase of 22.6% (Ranked #7 among all central state-owned enterprises) In 2009, consolidated total assets amounted to over US$39bn and total assets under management of US$333bn Main businesses include: Transportation and related infrastructure (Ocean shipping, toll roads, port investment and management and logistics) Banking and securities and asset management Property development and management Development of industrial parks Major/controlling shareholder in 9 listed companies with a combined market capitalization of US$36.4bn Leading investor and operator of toll roads in China with investments in 25 toll roads, bridges and tunnels with more than 5,000 km in over 18 provinces, autonomous regions and municipalities (~8% market share of China’s highway market) Investments in 14 listed toll roads companies Indirect controlling shareholder of CMHP, the largest toll road company listed on the Singapore Stock Exchange Strong Heritage and Support from Parent CMG 4 CMG Huajian Transportation Economic Development Center
28. 6. Financing Structure & Impact on CMHP
29. Purchase Consideration and Indicative Financing Structure(1) Plan I: The Transaction will be funded by internal cash and debt financing Plan II: Part of the debt will be replaced by equity through an Equity Fund Raising (EFR) The financing terms herein are illustrative only and may not represent the actual terms Funding Requirement Plan I: Cash + Debt Plan II: Cash + Debt + Equity HK$1,000m Internal cash HK$2,533m Acquisition of 51% stake in Wenzhou Yongtaiwen Co HK$1,000m Internal cash HK$1,533m Debt HK$889m Debt HK$644m Equity(2) (1) Figures taken from the “pro forma financial effects” section of the announcement (2) Assumes 144m (20%) Share Placement at S$0.81 per share, being the fully diluted NAV per share as at 31 December 2009
30. Financial Impact from Financing Structure Total Debt/Total Capitalization(1) Total Debt/EBITDA(1)(4) (2) (2) (2) (2) EBITDA/Interest Expense(1)(4) Shareholding Structure Current Plan I Plan II Shareholding Structure Assumes 144m (20%) Shares Placement for Plan II (2) (2) Shareholding Structure (Fully diluted with full RCPS conversion) The acquisition of the target asset would significantly enhance CMHP’s portfolio size and profitability Source: Company filings (1) Accounted for on a fully consolidated basis (2) Consideration financed by (i) Plan 1, internal cash (HKD1.0bn) and debt (HKD1.5bn at interest rate of 5.9%), and (ii) Plan 2, internal cash (HKD1.0bn), equity placement (HKD0.6bn - 20% of issued capital placed at SG$0.81 per share) and debt (HK0.9bn at interest rate of 5.9%). Financing terms are illustrative only and may not represent actual terms (3) Free cash flow is calculated as operating cash flow plus investing cash flow (4) Consolidated EBITDA includes contributions from JCEs in the form of dividend distribution and consolidates 100% of Target EBITDA
31. 7. Conclusion
32. CMHP is a Unique and Attractive Investment Healthy dividend play and strong earnings growth potential Solid fundamentals of the PRC toll road industry Quality toll road assets and experienced management team Continued and strong support from CMG
33. Thank you
34. Disclaimer This presentation may contain forward-looking statements regarding, among other things, the Company’s outlook, business and strategy which are current as of the date they are made. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such statements. You are cautioned not to place undue reliance on these forward-looking statements which are based on the current views of Company’s Management on future developments and events.