Monday, March 1, 2021
 
Columnist
Martin Hennecke
 
CHINA ITS
HKEx Stock Code : 01900 
 
Corporate Profile
The principal activities are to provide ITS and transportation infrastructure technology solutions and services to expressway, railway (including
rapid transit) and urban traffic sectors of the transportation industry in China.

Business Review - For the year ended December 31, 2012

In 2012, the Expressway sector recorded revenue of RMB1,158.4 million, representing 51.9% of the Group's total revenue, the Railway (including urban rapid transit) sector recorded revenue of RMB611.8 million, representing 28.5% of the Group's total revenue, and the Urban Traffic sector recorded revenue of RMB394.6 million, representing 18.4% of the Group's total revenue.

(i) Expressway

In 2012, the Expressway sector recorded revenue of RMB1,158.4 million, representing an increase of 31.4% as compared to RMB881.3 million in 2011. The new contracts and orders secured of the Expressway sector amounted to RMB1,465.6 million, representing an increase of 58.5% as compared with last year. As at the end of 2012, backlog of the Expressway sector was RMB887.2 million, representing an increase of 51.4% as compared with last year. The results reflected a historical high revenue for the Expressway sector with numerous milestone projects showing our Group's solid track record and new product implementation abilities.

In 2012, the major projects of the Expressway sector included Liaoning Zhuang-Gai (Zhuanghe-Gaizhou) Expressway Project, Hebei Zhang-Shi (Zhangjiakou-Shijiazhuang) Expressway Tunnel Project, and Jiangsu Expressway Network Communication Renovation Project.

In December 2012, the Group introduced strategic investor Beijing Global Holdings Limited (the ¡§Beijing Global¡¨), a wholly owned subsidiary of CSOP Growth Fund (together with Beijing Global, the ¡§Expressway Strategic Investor¡¨) as a 36.75% shareholder of the Expressway sector. Under the agreement, Beijing Global will subscribe to new shares to be issued by the Group's expressway holding company, China Expressway Group at the amount of RMB550 million. The proceeds will be used to facilitate the reorganization of the Group's businesses in the Expressway sector, to increase company's working capital for business expansion, and to meet further capital requirement in our future innovative business model. As the Expressway Strategic Investor has extensive experience in investing in businesses in the technology sector in the PRC, it is expected that the Expressway Strategic Investor will bring strategic values including the contribution of capital and the strategic input into the Company to future business expansion and new technology implementation of the expressway business of the Company. In early 2013, the Expressway sector was awarded a contract with Yunnan Dali Expressway Construction Headquarters at the amount of RMB510.6 million, of which the contract value is a historical high in Mainland expressway ITS industry. The board believes that this construction contract reflects our new business breakthrough in the western region after introducing the Expressway Strategic Investor as our strategic investor and reorganization in the Expressway sector.

For the further information of the Expressway Strategic Investor's investment into the Expressway sector, please refer to the circular of the Company on January 18, 2013, and the announcements of the Company dated December 11, 2012, December 12, 2012, January 4, 2013 and January 14, 2013.

(ii) Railway (including urban rapid transit)

In 2012, the Railway sector recorded revenue of RMB611.8 million, representing an increase of 17.7% as compared to RMB520.0 million in 2011. The new contracts signed and orders secured of the Railway sector amounted to RMB595.7 million, representing an increase of 1.6% as compared with last year. As at the end of 2012, backlog of the Railway sector was RMB686.1 million, representing a slight decrease of 2.3% as compared with last year. The MOR restructuring was well expected and the Group was strategically positioned to continue capture ¡§12th Five-Year Plan¡¨ spending in railway construction with diversified coverage in high speed passenger train and local railway bureaus by traditional specialized communications solutions products and new SS respectively. The Group successfully launched new solutions such as video conferencing and platform screen doors automation solution in order to diversify our railway offerings, and also completed meaningful milestone projects such as passenger ticket system.

In 2012, the major projects of the Railway sector included Xiang-Gui (Hunan-Guangxi) GSM Network Project, Web Passenger Ticket System Project and Beijing Subway Line 6 Project.

(iii) Urban Traffic

The Urban Traffic sector is considered the most promising high growth generator of the group in 2013 and 2014 as the market is full of exciting opportunities without a lot of powerful players. Apparently, the Group's current setup in the Urban Traffic sector after combining the traditional urban traffic specialized solution business units with the two newly acquired entities China Traffic Holding Limited (the ¡§CTH¡¨) and STONE formed a very strong and leading player in the market, who can dominate the booming urban traffic sector in the ITS industry in any part of the PRC.

In 2012, the Urban Traffic sector recorded revenue of RMB394.5 million, representing a significant increase of 129.2% as compared to RMB172.2 million in 2011. The new contracts signed and orders secured of the Urban Traffic sector amounted to RMB527.2 million, representing an increase of 53.5% as compared with last year. As at the end of 2012, backlog of the Urban Traffic sector was RMB434.2 million, representing an increase of 46.9% as compared with last year.

In 2012, the major projects of our Urban Traffic sector included Jining ITS Project, Weifang ITS Project, and Zhongshan ITS Project.

In 2012, the Company announced a transaction with total consideration of RMB137.3 million of which RMB32.7 million was satisfied by Shares to acquire a total of 75% ownership in STONE, an urban traffic TS and SS provider. STONE is the leading provider of integrated urban traffic system, solutions and service. After acquiring the STONE, the Company completed the urban traffic layout with solid potential from all fronts including product portfolio, geographical and customer coverage. The Urban Traffic sector is currently undergoing internal restructuring process, and the Board believes that Urban Traffic sector will become a strong and stable recurring revenue generator in addition to expressway and railway businesses.

(iv) Smart City

Smart City refers to a new generation of city with a variety of intelligent technologies, including the internet of things, remote sensing systems, intelligent buildings, network surveillances and digital services. By utilizing and improving telecommunication and information technology infrastructures, industries and community management will be facilitated by the massive intelligent information system.

As a new business sector of the Group since 2011, the Smart City sector integrated resources of the existing Urban Traffic sector and further expanded the business scope by providing one-stop-shop solutions to municipal governments. The Group is still on experimental stage with five projects undergoing in Northeast China. The Group will carefully evaluate the feasibility, profitability, and account receivable recoverability of each project before committing to any resource in the Smart City sector. The Board believes that the Smart City sector will create much more value in 2013.


Business Outlook - For the year ended December 31, 2012

(i) Expressway

2013 is the third year of ¡§12th Five-Year Plan¡¨, the government will continue to invest in and increase the capital expenditure (the ¡§CAPEX¡¨) spending on enhancing coverage of the expressway network. The national expressway network will comprise of 7 radial expressways, 9 vertical expressways and 18 horizontal expressways, respectively. The expressway construction in east region of China has come into post-construction stage where new technology is required in value-added services provision. Meanwhile, west region is still at construction stage and more capital is required in new innovative business models. The Board believes that the Group's business in the Expressway sector will experience significant growth and increase in market shares, especially after the introduction of Expressway Strategic Investor at the end of 2012.

(ii) Railway

To cover cities with population of over 500,000, China's ¡§12th Five-Year Plan¡¨ for railway targets to build 30,000 km of new railway lines by 2015. In September 2012, the National Development and Reform Commission approved the feasibility reports of 25 urban railway projects with a total contract value of over RMB700 billion as part of the new economic stimulus package. The related projects are located in Shenzhen, Chengdu, Changchun, Tianjin, Hangzhou, Suzhou, etc. High-speed railway network will also reach 45,000 km according to the ¡§12th Five-Year Plan¡¨. The total investments in railways amount to RMB2.8 trillion during the ¡§12th Five-Year Plan¡¨ period. The Group will continue focusing on local bureaus' product upgrading and maintaining existing lines, especially those newly built high-speed railways with over 60% market share we served before during the last three to four years.

(iii) Urban Traffic

To accommodate the needs resulted from growth of urban traffic and to resolve traffic congestion issues, RMB700 billion was planned to be invested in urban roadway traffic construction during the period of the ¡§12th Five-Year Plan¡¨ according to the Ministry of Housing and Urban-Rural Development. According to China's Ministry of Public Security, motor vehicle ownership in the country reached 233 million by mid-2012, and the number is expected to become more than double in the next 10 years. As a side effect of this boom, urban traffic congestion has been deteriorating rapidly in almost every city in China, bringing attention to the need for more efficient traffic management systems.

After acquiring CTH in 2011 and STONE in 2012, the Urban Traffic sector has completed its full shape structuring with pioneering track record, top tier team members, extensive products and completed business model coverage amongst other competitors in the market. After finishing the ongoing restructuring, the Group will have three business units covering video surveillance, information platform and ITS integration solutions. With such diversified corporate structure, the sales network will be expanded to all types of businesses in the Urban Traffic business throughout China. The Board believes that the Urban Traffic sector performance will be the top compared with other sectors as a result of the abundance of internal resources and external policy advantages.

(iv) Smart City

The development of smart city will be prioritized and around 600-800 cities are expected to begin work on their smart city projects within the ¡§12th Five-Year Plan¡¨ period, which could stimulate market demand of RMB2 trillion across the entire value chain. The Group will carefully evaluate the smart city business opportunities and find a proper way to maintain the quality of customers and contracts in balance with top line growth. The Group believes that the Smart City sector will be one of the most distinctive smart city solution providers in China.

In addition to the four major sectors, the Group will strategically expand our business into new traffic sectors and carry out reorganization for other traffic related businesses in 2013.

From the human resource angle, as many new teams join the Group, we are facing challenges of compatibility of corporate culture and management integrations. The new teams will be trained and integrated with the existing ones, who will learn from each other and grow together. The Board believes that new teams will not only play a role in promoting the development of business, but also bring lots of experience and business talents to improve the Group's overall management team levels.

As for marketing and R&D, the Group will continue to promote the development in order to maintain our leading position in ITS industry. Furthermore, the Group aims to be the standard maker in the PRC ITS industry, which implies our business model, products, solutions and technologies will occupy the leading position in the industry. As a result, the Group will establish marketing and R&D systems which are tailored made for long-term development planning, major cooperation developing and technology management.

Looking forward, the Group will continue offering turnkey and specialized ITS solutions and value-added services that address fundamental needs such as safety, reliability, efficiency, pollution reduction and efficiency enhancement in Expressway, Railway, Urban Traffic and Smart City sectors. We believe that ITS industry, taking advantage of the implementation of new urbanization strategy, will remain at a fast development stage. The Group will consolidate mature sectors such as the Expressway and the Railway sectors and expand business in the Urban Traffic sector, and the Board believes that this strategy can help the Group to achieve healthy development in the future.

Source: China ITS (01900) Annual Results Announcement
Chairman Liao Jie Issued Capital (shares) 1,646M
Par Value HKD 0.0002 Market Capitalisation (HKD) 3,160M
 
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