SHANGHAI, July 22 - China Railway Group <0390.hk> <601390.ss>, the country's largest railway and highway builder, said on Tuesday it has won a railway construction contract worth 10.58 billion yuan .
The value of the contract to build passenger rail links between Beijing and the northern Chinese city of Shijiazhuang is equivalent to 5.9 percent of its 2007 sales under domestic accounting standards, it said in a statement.
Wednesday, July 23, 2008
China Railway's strong Shanghai debut sets momentum for Hong Kong listing
12.03.07, 6:16 AM ET
HONG KONG (Thomson Financial) - Shares of China Railway Group, Asia's largest construction contractor, surged on their debut in Shanghai Monday, signalling renewed confidence in listings by Chinese firms.
China Railway's yuan-denominated shares rose nearly 69 percent to 8.09 yuan in Shanghai against an initial public offering price of 4.80 yuan.
The company's solid debut augurs well for upcoming listings by Chinese companies in Hong Kong and Shanghai, while boosting investor hopes China Railway's opening trade in Hong Kong on Friday will be as strong.
Prior to China Railway's debut, appetite for IPOs appeared to have waned, with two Chinese companies seeing their shares fall on their recent debut in Hong Kong.
Shares in Sinotruk, China's leading heavy truck manufacturer, fell 15 percent on its first day of trading in Hong Kong last week, which was the worst debut on the city's bourse this year.
Prior to that, shares of Sinotrans Shipping, a dry bulk carrier in China, tumbled 13 percent when they were listed in Hong Kong for the first time.
Setting benchmark
'China Railway's performance today lifted investor confidence about IPOs here,' said Kenny Tang, associate director at Tung Tai Securities.
'Hopes are high China Railway won't disappoint when it debuts on Friday,' he said.
China Railway's gains in Shanghai supported market sentiment in Hong Kong as it indicated the level of enthusiasm for IPOs and equities in general.
'In the past few weeks, new shares have not performed well. China Railways may reverse that situation,' said Conita Hung, research head at Delta Asia Securities.
China Railway's IPO attracted a record 3.3 trillion yuan from investors last week, allowing the nation's largest construction contractor to raise 21.93 billion yuan in Shanghai, and another 19.2 billion Hong Kong dollars in Hong Kong.
In Hong Kong, its retail shares were oversubscribed by more than 205 times, attracting 400 billion Hong Kong dollars worth of applications.
'Judging from the Shanghai debut, the company could possibly post decent gains when it starts trading (in Hong Kong) on Friday,' said Tang.
Long-term investment
China Railway's strong fundamentals, given its leadership in the railway construction sector in the mainland, is supporting sentiment on the stock.
Beijing has budgeted 1.5 trillion yuan for its rail network over the next four years, the most in its history, as it upgrades its railway system with a plan to build a bullet train from Shanghai to Beijing.
China's rapidly-growing economy and brisk trade are boosting demand for faster and more sophisticated means of transportation, brightening prospects for companies like China Railway.
China's gross domestic product expanded more than 11 percent in the last two quarters and the International Monetary Fund is forecasting growth of 11.5 percent for the full year, up from 11 percent in 2006. Next year, growth may slow to 10 percent, it said.
China Railway is ideal for long-term investment, given the increasing number of projects the company will take on as China's economy expands, said analysts.
'China's robust economy will be the main earnings driver for China Railway. It could trade at a premium to peers given its leadership in the railway construction sector in China,' said Hung at Delta Asia.
(1 US dollar = 7.8 Hong Kong dollars, 7.4 yuan)
HONG KONG (Thomson Financial) - Shares of China Railway Group, Asia's largest construction contractor, surged on their debut in Shanghai Monday, signalling renewed confidence in listings by Chinese firms.
China Railway's yuan-denominated shares rose nearly 69 percent to 8.09 yuan in Shanghai against an initial public offering price of 4.80 yuan.
The company's solid debut augurs well for upcoming listings by Chinese companies in Hong Kong and Shanghai, while boosting investor hopes China Railway's opening trade in Hong Kong on Friday will be as strong.
Prior to China Railway's debut, appetite for IPOs appeared to have waned, with two Chinese companies seeing their shares fall on their recent debut in Hong Kong.
Shares in Sinotruk, China's leading heavy truck manufacturer, fell 15 percent on its first day of trading in Hong Kong last week, which was the worst debut on the city's bourse this year.
Prior to that, shares of Sinotrans Shipping, a dry bulk carrier in China, tumbled 13 percent when they were listed in Hong Kong for the first time.
Setting benchmark
'China Railway's performance today lifted investor confidence about IPOs here,' said Kenny Tang, associate director at Tung Tai Securities.
'Hopes are high China Railway won't disappoint when it debuts on Friday,' he said.
China Railway's gains in Shanghai supported market sentiment in Hong Kong as it indicated the level of enthusiasm for IPOs and equities in general.
'In the past few weeks, new shares have not performed well. China Railways may reverse that situation,' said Conita Hung, research head at Delta Asia Securities.
China Railway's IPO attracted a record 3.3 trillion yuan from investors last week, allowing the nation's largest construction contractor to raise 21.93 billion yuan in Shanghai, and another 19.2 billion Hong Kong dollars in Hong Kong.
In Hong Kong, its retail shares were oversubscribed by more than 205 times, attracting 400 billion Hong Kong dollars worth of applications.
'Judging from the Shanghai debut, the company could possibly post decent gains when it starts trading (in Hong Kong) on Friday,' said Tang.
Long-term investment
China Railway's strong fundamentals, given its leadership in the railway construction sector in the mainland, is supporting sentiment on the stock.
Beijing has budgeted 1.5 trillion yuan for its rail network over the next four years, the most in its history, as it upgrades its railway system with a plan to build a bullet train from Shanghai to Beijing.
China's rapidly-growing economy and brisk trade are boosting demand for faster and more sophisticated means of transportation, brightening prospects for companies like China Railway.
China's gross domestic product expanded more than 11 percent in the last two quarters and the International Monetary Fund is forecasting growth of 11.5 percent for the full year, up from 11 percent in 2006. Next year, growth may slow to 10 percent, it said.
China Railway is ideal for long-term investment, given the increasing number of projects the company will take on as China's economy expands, said analysts.
'China's robust economy will be the main earnings driver for China Railway. It could trade at a premium to peers given its leadership in the railway construction sector in China,' said Hung at Delta Asia.
(1 US dollar = 7.8 Hong Kong dollars, 7.4 yuan)
China Comservice Share Capital
The Company was incorporated on 30 August 2006 with a registered share capital of, 960,000,000 domestic state-owned ordinary shares with a par value of RMB1.00 each. Such shares were issued to CTC, Guangdong Telecom Industry Group Corporation and Zhejiang Telecom Industry Corporation, as a consideration for the transferring of the Predecessor Operations and injection of cash to the Company (see note 1). In December 2006, the Company issued 1,484,986,000 H shares with a par value of RMB1.00, at a price of HK$2.20 per H share and 148,498,600 domestic state-owned shares of RMB1.00 each owned by CTC were converted into H shares in connection with the initial public offering. All shareholders are entitled to receive dividends as declared from time to time except for the special dividends and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
China Comservice Background Information
China Comservice is a leading integrated provider of specialized telecommunications support services to telecommunications operators in the PRC. It was a spin-off from former state owned company China Telecom. It offers telecommunications infrastructure ("TIS") services, business process outsourcing ("BPO") services, and applications, content and other ("ACO")services. All five major telecommunications operators in the PRC, namely, China Telecom, China Mobile, China Unicom, China Netcom, and China Railcom, are China Comservice customers. It also provides services to telecommunications equipment manufacturers, corporate customers, governmental organizations and public customers in the PRC. On 8 December 2006, the H shares issued by the Company were successfully listed on the Main Board of the Stock Exchange of Hong Kong Limited.
China Comservice provides integrated services relating to all stages of the business of telecommunications operators, from telecommunications network construction, maintenance, operation to the provision of services to users. It offers telecommunications infrastructure ("TIS") services, business process outsourcing ("BPO") services and applications, content and other ("ACO") services:
TIS Services
We provide telecommunications infrastructure services, including telecommunications network planning and design, construction, and project supervision and management.
Design Services
We offer planning and design services for fixed line and mobile telecommunications networks. Our services include consultancy, planning, field survey and design of telecommunications networks, civil engineering projects and other auxiliary facilities.
Construction Services
We carry out the construction, installation and adjustment work relating to fixed line and mobile telecommunications infrastructures, and help telecommunications operators form their network capability to provide telecommunications services. Our services include:
• laying and installation of electrical and optical duct and cable networks for communications systems;
• installation, adjustment and testing of communications equipment;
• civil engineering works and construction of other auxiliary infrastructures;
• telecommunications network optimization projects.
Project Supervision and Management Services
We offer clients with project supervision and management services. Through such independent services, we help customers control the quality, progress, cost and security of communications related projects, organize project completion inspections and acceptance, and conduct settlement auditing services.
BPO Services
We provide comprehensive, high quality BPO services to telecommunications operators in China, offering a range of network maintenance, distribution of telecommunications services and products and facilities management services.
Network Maintenance
We offer services for the maintenance and repair of telecommunications network infrastructure and enterprise intranet, including:
• maintenance of telecommunications pipelines, cables and telecommunications related physical premises;
• maintenance of mobile telecommunications base stations, personal handy phone system base stations and communications equipment rooms; and
• maintenance and repair of equipment.
Distribution of Telecommunications Services and Products
We provide distribution channels for telecommunications services and products, including:
• subscriber base development for telecommunications services offered by telecommunications operators;
• installation and removal of fixed lines and broadband lines for telecommunications operators and bill delivery and fee collection for telecommunications operators;
• distribution and sale of scratch cards for telecommunications operators; and
• distribution of other services developed by telecommunications operators.
Facilities Management
We provide facilities management services for telecommunications operators, including the management, maintenance and security of communications premises and equipment rooms, as well as other telecommunications facilities. We also provide the maintenance of intelligent buildings and management services for office buildings, residential compounds, and commercial buildings.
ACO Services
We offer a variety of IT applications, Internet services, value added voice services, and other services for telecommunication operators and enterprise customers, as well as the public.
IT Applications
We offer information technology applications services, including system integration, communications network support services and software and hardware development to telecommunications operators and other enterprise users.
Value Added Voice Services
• Upon the demand of telecommunications operators and other enterprise customers, we provide marketing, customer-help and after-sale services on behalf of our customers through our call centers. For example, we are operating the "10000" customer service lines for China Telecom in certain regions.
• Interactive voice response services (IVR). We provide lifestyle and entertainment information services for China Telecom's 160 and 168 paid information lines, and offer industry information services in cooperation with government agencies.
• Ring tones and colourful back tones services for telephony users' subscription.
Internet Services
We offer the following Internet services independently or in cooperation with telecommunications operators, such as ICP content provision, Internet resources provision, e-commerce (such as certificate authentication and electronic payment services), and Internet cafes.
China Comservice provides integrated services relating to all stages of the business of telecommunications operators, from telecommunications network construction, maintenance, operation to the provision of services to users. It offers telecommunications infrastructure ("TIS") services, business process outsourcing ("BPO") services and applications, content and other ("ACO") services:
TIS Services
We provide telecommunications infrastructure services, including telecommunications network planning and design, construction, and project supervision and management.
Design Services
We offer planning and design services for fixed line and mobile telecommunications networks. Our services include consultancy, planning, field survey and design of telecommunications networks, civil engineering projects and other auxiliary facilities.
Construction Services
We carry out the construction, installation and adjustment work relating to fixed line and mobile telecommunications infrastructures, and help telecommunications operators form their network capability to provide telecommunications services. Our services include:
• laying and installation of electrical and optical duct and cable networks for communications systems;
• installation, adjustment and testing of communications equipment;
• civil engineering works and construction of other auxiliary infrastructures;
• telecommunications network optimization projects.
Project Supervision and Management Services
We offer clients with project supervision and management services. Through such independent services, we help customers control the quality, progress, cost and security of communications related projects, organize project completion inspections and acceptance, and conduct settlement auditing services.
BPO Services
We provide comprehensive, high quality BPO services to telecommunications operators in China, offering a range of network maintenance, distribution of telecommunications services and products and facilities management services.
Network Maintenance
We offer services for the maintenance and repair of telecommunications network infrastructure and enterprise intranet, including:
• maintenance of telecommunications pipelines, cables and telecommunications related physical premises;
• maintenance of mobile telecommunications base stations, personal handy phone system base stations and communications equipment rooms; and
• maintenance and repair of equipment.
Distribution of Telecommunications Services and Products
We provide distribution channels for telecommunications services and products, including:
• subscriber base development for telecommunications services offered by telecommunications operators;
• installation and removal of fixed lines and broadband lines for telecommunications operators and bill delivery and fee collection for telecommunications operators;
• distribution and sale of scratch cards for telecommunications operators; and
• distribution of other services developed by telecommunications operators.
Facilities Management
We provide facilities management services for telecommunications operators, including the management, maintenance and security of communications premises and equipment rooms, as well as other telecommunications facilities. We also provide the maintenance of intelligent buildings and management services for office buildings, residential compounds, and commercial buildings.
ACO Services
We offer a variety of IT applications, Internet services, value added voice services, and other services for telecommunication operators and enterprise customers, as well as the public.
IT Applications
We offer information technology applications services, including system integration, communications network support services and software and hardware development to telecommunications operators and other enterprise users.
Value Added Voice Services
• Upon the demand of telecommunications operators and other enterprise customers, we provide marketing, customer-help and after-sale services on behalf of our customers through our call centers. For example, we are operating the "10000" customer service lines for China Telecom in certain regions.
• Interactive voice response services (IVR). We provide lifestyle and entertainment information services for China Telecom's 160 and 168 paid information lines, and offer industry information services in cooperation with government agencies.
• Ring tones and colourful back tones services for telephony users' subscription.
Internet Services
We offer the following Internet services independently or in cooperation with telecommunications operators, such as ICP content provision, Internet resources provision, e-commerce (such as certificate authentication and electronic payment services), and Internet cafes.
My Analysis: China Telecom
China Telecom plans to issue $7.3 bln domestic bond. Good way to get funding to upgrade its DSL and CDMA networks. My opinions are:
1. CDMA technology is relatively outdated compare to GSM and 3G. This may affect adoption rate. Having said that, how many subscribers in Singapore actually use 3G function? My concern may be trivial.
2. China Telecom Gearing of 48% is relatively high compare to SingTel 39% and China Mobile 34%. China Telecom current ratio is dangerously low at 0.31 compare to China Mobile 1.34 and SingTel 0.68. Bond issue may help to clean up their current account.
3. China Telecom PE is about 14, similar to SingTel but significantly lower than China Mobile (PE 24). It shows that investors are willing to pay a premium for China Mobile for its market share, growth potential and strong balance sheet.
4. China Telecom Price-to-NTA ratio is 1.43 compare to SingTel 2.66. So, China Telecom is cheaper than SingTel and China Mobile.
5. China Telecom earning growth is only 1.1% compare to SingTel 4.8% and China Mobile 31%. The problem lies on decreasing fixed line subscribers as more users switch to mobile line. The silver lining is the growth of its DSL (broadband) and CDMA (Mobile) businesses. My take is that China Telecom has more upside compare to other telecoms because it 43 million mobile subscribers base offer more growth potential than China Netcom (125 million) and China Mobile (399 million). Looking at the growth potential in China and current stock valuation, I think China Telecom is worth investing at current price.
1. CDMA technology is relatively outdated compare to GSM and 3G. This may affect adoption rate. Having said that, how many subscribers in Singapore actually use 3G function? My concern may be trivial.
2. China Telecom Gearing of 48% is relatively high compare to SingTel 39% and China Mobile 34%. China Telecom current ratio is dangerously low at 0.31 compare to China Mobile 1.34 and SingTel 0.68. Bond issue may help to clean up their current account.
3. China Telecom PE is about 14, similar to SingTel but significantly lower than China Mobile (PE 24). It shows that investors are willing to pay a premium for China Mobile for its market share, growth potential and strong balance sheet.
4. China Telecom Price-to-NTA ratio is 1.43 compare to SingTel 2.66. So, China Telecom is cheaper than SingTel and China Mobile.
5. China Telecom earning growth is only 1.1% compare to SingTel 4.8% and China Mobile 31%. The problem lies on decreasing fixed line subscribers as more users switch to mobile line. The silver lining is the growth of its DSL (broadband) and CDMA (Mobile) businesses. My take is that China Telecom has more upside compare to other telecoms because it 43 million mobile subscribers base offer more growth potential than China Netcom (125 million) and China Mobile (399 million). Looking at the growth potential in China and current stock valuation, I think China Telecom is worth investing at current price.
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