Stock Code: 2880.HK Landmark Transaction to Build the ... ppt Project 216.pdf · 5 The port of Dalian – the flagship of North-East Asia international shipping center − Total water

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Stock Code: 2880.HK

Landmark Transaction to Build the North-East Asia

International Shipping Center

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These materials have been prepared by Dalian Port (PDA) Company Limited solely for use at this presentation and have not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions presented or contained in these materials. It is not the intention to provide, and you may not rely on this document as providing, a complete or comprehensive analysis of the financial or trading positions or prospects of Dalian Port (PDA) Company Limited. None of Dalian Port (PDA) Company Limited or any of its respective directors, officers employees, agents affiliates, advisors or representatives has any liability whatsoever in negligence or otherwise for any loss however arising from any information or opinions presented or contained in these materials or otherwise arising in connection with these materials

The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed.

These materials are for information purpose only and do not constitute or form part of invitation or offer to acquire, purchase or subscribe for securities

DisclaimerDisclaimerDisclaimer

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Table of ContentsTable of ContentsTable of Contents

Section 1: The Port of Dalian

Section 2: Transaction Overview

Section 3: Information on the Target Assets &

Use of A-share IPO Proceed

Section 4: Potential Financial Effects

3

Section 1: The Port of Dalian

4

4.1 5.0

12.4

5.7

-10.3

-15.5

3.8

-20

-15

-10

-5

0

5

10

15

17.515.7

10.9 10.7

4.1

9.57.0

0

5

10

15

20

Tianjin Qingdao Dalian Ningbo Shanghai Shenzhen Guangzhou

PRC Port ClustersPRC Port Clusters

Ports in the PRC are generally located in the following regions:

− Bohai Rim Region

− Yangtze River Delta

− Pearl River Delta

Aggregate Cargo Throughput CAGR 2006-08Principal Port Regions

Port of Dalian – More Resilient to Economic Downturn

Source: Ministry of Transport of the PRC

Pearl River Delta

Ningbo

Shenzhen

DalianTianjin

Qingdao

Shanghai

XiamenGuangzhouYangtze River Delta

Bohai Rim Region

■ YoY growth of aggregate cargo throughput for the eight months ended 31 August 2008 and 2009

(Growth %)Bohai Rim Region Yangtze River Delta Pearl River Delta

Tianjin Qingdao Dalian Ningbo Shanghai Shenzhen Guangzhou

(Growth %)Bohai Rim Region Yangtze River Delta Pearl River Delta

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The port of Dalian – the flagship of North-East Asia international shipping center

− Total water area: approx. 310 square kilometers− Total land area: approx. 18 square kilometers

Located at the entrance to Bohai Bay and serves as the most important ocean gateway to its vast hinterland in Northeastern China

Over 50 regular liners have developed more than 100 shipping routes connecting the port of Dalian to over 300 ports in more than 160 countries

Northeastern China is one of China's fastest developing regions

− GDP of Northeastern China has been growing at a faster pace than the China’s average growth rate in 2006, 2007 and 2008

GDP growth rate in

2008

Excess over China’s GDP

growth rate of 9% in 2008

Liaoning Province 13.1% 4.1%

Jilin Province 16.0% 7.0%

Heilongjiang Province 11.8% 2.8%

GDP Growth of Northeastern China

Source: National Bureau of Statistics of the PRC

The Port of Dalian– A Key Ocean Gateway to the World

The Port of Dalian– A Key Ocean Gateway to the World

6

a map of ports in the Bohai Rim Region to be added

A Key Step to Become a Leading Port Operator in Bohai Rim Region

A Key Step to Become a Leading Port Operator in Bohai Rim Region

Pearl River Delta

Ningbo

Shenzhen

DalianTianjin

Qingdao

Shanghai

XiamenGuangzhouYangtze River Delta

Bohai Rim Region

We are to…

Establish a solid platform for future consolidation of port resources

Tianjin Port

Qinhuangdao Port

Yingkou Port

Dalian Port

Yantai Port

Qingdao Port

Rizhao Port

Jinzhou Port

Generate business synergies and enhanced competitiveness

1

Become more resilient to economic downturn with an expanded business scope in cargo mix

2

3

Gain more financing flexibilities by accessing to both Hong Kong and PRC capital markets

4

Bohai Bay

7

Section 2: Transaction Overview

8

Proposed A Share IssueProposed A Share IssueProposed A Share Issue

Offering Type Initial Public Offering of A Shares

Listing Stock Exchange Shanghai Stock Exchange

Target SubscribersPublic offering shares: Qualified individual and institutional A share investors Consideration shares: Dalian Port Company Limited (“PDA”)

Issue Price

Determined based on price consultation results with potential investors and prevailing market condition at the time of listing No less than 90% of the average trading price of the H shares during the period of 20 trading days immediately prior to the date of the preliminary prospectus for the proposed A share issue

Number of Issued SharesPublic offering shares: no more than 1,200 million sharesConsideration shares: no more than 1,200 million shares

Use of ProceedsInvestment in terminals and related logistics servicesRepayment of bank loans and use for general working capital

Conditions Precedent Proposed Acquisition of the Target Assets

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Proposed AcquisitionProposed AcquisitionProposed Acquisition

Acquiror Dalian Port (PDA) Company Limited (“Acquiror” or “Company”)

Vendor Dalian Port Corporation Limited (“PDA”)

Target Assets

Ore Terminal Operation General Cargo Terminal OperationBulk Grain Terminal OperationPassenger and Ro-Ro Terminal OperationPort Ancillary Operation

ConsiderationRMB2,805 million by consideration shares (Subject to adjustment based on the audited net asset value of the Target Assets, and depreciation, amortisation and other expense items )

Issue Price of Consideration Shares Same as the public A share offering price

Conditions Precedent Issue of public A share

10

TimetableTimetableTimetable

Registers of Shareholders close (both days inclusive)

Saturday, 31 October 2009 to Monday, 30 November 2009

Latest time for return of proxy forms for the EGM

9:00 am on Sunday, 29 November 2009

Latest time for return of proxy forms for the Domestic Shareholders Class Meeting


Latest time for return of proxy forms for the H Shareholders Class Meeting


EGM 9:00 am on Monday, 30 November 2009

Domestic Shareholders Class Meeting

11:00 am on Monday, 30 November 2009

H Shareholders Class Meeting 11:30 am on Monday, 30 November 2009

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Section 3: Information on the Target Assets &

Use of A-share IPO Proceeds

12

144

146

90

31Ore

General Cargo

Bulk Grain

Passenger andRo-Ro

The Port of Dalian – History & Business Structure

The Port of Dalian – History & Business Structure

1899

2003

2005

2006

1899: the port of Dalian was founded

2003: PDA was established as part of the Port of Dalian Authority’s initiative to separate its government administrative and commercial functions

2005: The Company was established with PDA as its controlling shareholder

2006: IPO of the Company on the Hong Kong Stock Exchange

Major port operations of the Company and PDA

2009 H1 Cargo Handling Revenue Breakdown of the Target Assets:

Company

PDA

Oil / Liquefied Chemical Terminal Operation

Containers Terminal Operation

Automobile Terminal Operation

Port Value Added Services

Ore Terminal Operation

General Cargo Terminal Operation

Bulk Grain Terminal Operation

Passengers and Ro-Ro Terminal Operation

Ancillary Port Operation

Target Assets

(RMB millions)

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Terminals of the Company & PDA

Dalian Bay Passengers and Ro-Ro Terminal

Automobile Terminal

Dalian Bay General Cargo Terminal

Ganjingzi General Cargo Terminal

Heizuizi General Cargo Terminal

Dagang Area Passengers and Ro-Ro Terminal

Dagang Area General Cargo Terminal

Container Terminal

Ore Terminal

Oil/Liquefied Terminal

Bulk Grain Terminal

North Coast of Dayao Bay

Location & Layout of Port of DalianLocation & Layout of Port of Dalian

Terminal held by PDA

Terminal held by the Company

14

193225

342

201 197

20.2% 20.0% 25.1%31.9% 32.2%

0

100

200

300

400

2006 2007 2008 2008 H1 2009 H1

Financial Highlights of the Target AssetsFinancial Highlights of the Target Assets

184208

286

160 151

19.4% 18.4% 21.0% 25.4% 24.7%

0

50

100

150

200

250

300

2006 2007 2008 2008 H1 2009 H1

9511,126

1,361

631 612

0

300

600

900

1,200

1,500

2006 2007 2008 2008 H1 2009 H1

39

24

6964 61

4.5% 3.3% 6.8% 11.2% 10.5%0

20

40

60

80

2006 2007 2008 2008 H1 2009 H1

Revenue Gross Profit

EBITDA Earnings Attributable to PDA

CAGR 19.6%

CAGR 24.5%

CAGR 33.2%

CAGR 33.5%(RMB millions) (RMB millions)

(RMB millions) (RMB millions)

YoY Growth (5.6)%

YoY Growth (4.7)%

YoY Growth (3.0)%

YoY Growth (2.0)%

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Target Business– Ore Terminal Operation

Target Business– Ore Terminal Operation

(000’ tonnes) One import handling berth with capable of accommodating up to 300,000 tonne vessels, which is one of the two largest ore berth in China

One import/export handling berth with capable of accommodating up to 150,000 tonne vessels

Stacking yards with storage capacity of approx. 5.2 million tonnes

The long term stable economic growth in the PRC and the government's incentive to revitalize the economy of Northeastern China enable the long term growth of steel industry in Northeastern China, which is expected to stimulate further growth of the Ore Terminal OperationImported ore handled by PDA accounted for around 50% of total volume imported through the ports in Liaoning province in 2009 H1Partnership with key steel clients and international mining companies will enable the Ore Terminal Operation to further expand its market in the northern area of China, as well as to facilitate the development of its transshipment operationsActively conduct value-added business like tax-free storage, transshipment, distribution, ore agitationBenefit from the increase of large-size vessels (ie. 400,000 tonne vessel) because of the natural deep water advantage of Dalian Port coupled with its location at the entrance of Bohai Bay

Operation OverviewHistorical Throughput

Competitive Strengths & Future Prospects

7,436

11,41013,438

6,420

12,477

-

4,000

8,000

12,000

16,000

2006 2007 2008 2008 H1 2009 H1

CAGR 34.4%(000’ tonnes)

YoY Growth 94.7%

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Target Business – General Cargo Terminal Operation

Target Business – General Cargo Terminal Operation

The economy revitalization plan for Northeastern China and the development of the coastal economic zone of Liaoning province provide unique opportunities for General Cargo Terminal Operation to be developed into a more advanced base for steel, coal and large equipments

Huge growth potential with PDA’s terminals which are strategically located at Changxing Island and Zhuanghe area, these being important development areas in the coastal economic zone of Liaoning Province

Subsidies in relation to the relocation and construction costs are expected to offset certain depreciation expenses arising from newly constructed port facilities and to improve profitability of the General Cargo Terminal Operation



(000’ tonnes)Mainly handles steel, coal, timber, equipment andpacked grain, of which steel and coal each accounted for over 30% of the aggregate general cargo throughput of 2009 H115,406

17,336

22,278

11,524 11,153

-

4,000

8,000

12,000

16,000

20,000

24,000

2006 2007 2008 2008 H1 2009 H1

CAGR 20.3%

YoY Growth (3.2)%

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Target Business – Bulk Grain Terminal Operation

Target Business – Bulk Grain Terminal Operation

One of the largest bulk grain terminals in China, accounting for approx.19% of the bulk grain throughput of Northeastern China in 2008

Competitive advantage in providing comprehensive logistic and value-added services through its “rail to sea”intermodal transportation system

Benefit from the strategic positioning of the northeastern region as an important grain production base in China and the “North-South Grain Transportation” policy of the PRC government.

Business expansion through its well established relationship with clients, railway companies and liners



(000’ tonnes) A total of 5 berths and a storage capacity of approx. 1.1 million cubic meters

Possessed a complete logistics operation system handling “north to south” grain transportation

Designated delivery barns for certain future commodities traded on the Dalian Commodities Exchange

8,0507,015 6,685

3,638 3,421

-

3,000

6,000

9,000

2006 2007 2008 2008 H1 2009 H1

CAGR (8.9)%

YoY Growth (6.0)%

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Target Business – Passengers & Ro-Ro Terminal Operation

Target Business – Passengers & Ro-Ro Terminal Operation

Largest passengers and ro-ro port operator in Bohai Rim Region. 2009 H1 passengers and ro-ro throughput accounted for 45.2% and 59.1%, respectively of the total market shares in Bohai Rim region

Completion of construction at the international cruise terminal in Dalian will stimulate the growth of the Passengers and Ro-Ro Terminal Operation

Plan to consolidate other port resources to expand operation scale and to become the hub for the passengers and ro-ro operations in Bohai Rim Region

Partnership with major shipping companies in China to further develop the Bohai Rim Region market



Situated at the golden coastal line along Bohai Rim Region

Has one of the largest handling capacities among other major ports in the PRC

Operates 7 designated passenger and roll on, roll off berths, 2 high speed boat berths, 4 domestic routes and 1 international route

3,8044,336

3,774

1,752 1,525

306 432 486 223 210-

1,000

2,000

3,000

4,000

5,000

2006 2007 2008 2008 H1 2009 H1Passengers ('000) Vehicles ('000)

CAGR (0.4)%

YoY Growth (13)%

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Ongoing Business Development– Use of IPO Proceeds

Ongoing Business Development– Use of IPO Proceeds

1

USE OF PROCEED

Eliminate Capacity Constrains – 58%

Ore Terminal OperationConstruction stacking yardsPurchase of gantry

Oil / Liquefied Chemical Terminal Operation

Construction of oil storage tanksConstruction of liquefied natural gas project

2 On-going Construction – 11 %

Container Terminal OperationPhase II & III of the container terminal projects at Dayao Bay Purchase container vessels

3 Relocation of Terminals – 10%

General Cargo Terminal Operation and Passengers & Ro-Ro Terminal Operation

Construction of berths at Dalian Bay

4 Operation Enhancement – 10 %

Bulk Grain Terminal OperationPurchase of bulk grain carriages

Purchase of Ro-Ro Ship

Automobile Terminal Operation

5 Logistic and Information System – 4%

Construction of logistics depots and centersPort Value-Added Service and Ancillary Port Operation

Construction of information system

Logistic Services

Others – 7 %

Repayment of Bank LoanGeneral Working Capital

6

20

Section 4: Potential Financial Effects

21

2.462.86

2.481.96

-

1

2

3

Jinzhou Port(600190.CH)

Rizhao Port(600017.CH)

Tianjin Port(600717.CH)

Yingkou Port(600317.CH)

48.81

29.15 26.14 30.32

-102030405060

Jinzhou Port(600190.CH)

Rizhao Port(600017.CH)

Tianjin Port(600717.CH)

Yingkou Port(600317.CH)

Reasonable Consideration for the AcquisitionReasonable Consideration for the Acquisition

Basis and Assumptions

Initial consideration: RMB2,805 million

Pro forma results of the Target Assets for 2009 H1: RMB70.9 million

Audited equity attributable to PDA of the Target Asset as at June 30 2009: RMB2,432 million

Implied PER and PBR of the Target Assets

Implied PER at different 2009 earnings:

PER(1) of Comparable Companies in Bohai Rim Region

PBR(1) of Comparable Companies in Bohai Rim Region

(x)

(x)

Median 29.74

Median 2.47

Note: (1) PER and PBR are based on last traded price of the comparable companies, their respective earnings and net assets values as quoted on Bloomberg on 12 October 2009

Target Assets 2009 Earnings

Implied PER of the Target Asset

(RMB million)100 28.05 x120 23.38 x140 20.04 x160 17.53 x

Implied PBR: 1.15x

Peer Group ComparisonA share companies are selected as comparables as the consideration shares will be issued at the same price as the A share IPO price

PER of A share listed comparable companies in Bohai Rim Region: 29.74x (median)

Implied PBR is much lower than PBR of the A share listed comparable companies in Bohai Rim Region traded at a median of 2.47x

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Potential Financial EffectsPotential Financial Effects

2009 H1 Revenue 2009 H1 Gross Profit

2009 H1 EBIT Trailing 12 month ROE (3)

Note: (1) a portion of ancillary operation’s revenue is expected to be eliminated after consolidation with the financials of the Acquiror (2) add up revenue, gross margin and EBIT of the Acquiror and those of the Target Assets without making eliminations(3) ROE calculation is base on pro forma combined trailing 12 month net profit of the Target Assets, trailing 12 month net profit of

the Company, total equity of the Target Assets and the Company as at 30 June 2009.

-

600

1,200

1,800

Acquiror Pre-Transaction Target Acquiror Post-Transaction

Ancillary and Port value-added Services Passengers and Ro-RoBulk Grain General CargoOre Container Oil / Liquefied Chemicals

Growth 81.4%(RMB millions)

753612

1,365

(2)

(1)

373

524

49.6%38.4%

-

200

400

600

Acquiror Pre-Transaction Acquiror Post-Transaction

(RMB millions)

(2)

Growth 40.5%

(2)

466366

-

200

400

600


(RMB millions)

Growth 27.3%

7.10%8.19%

0.00%2.00%4.00%6.00%8.00%

10.00%


23

10,844

16,272

-

6,000

12,000

18,000


1,0161,222

-

400

800

1,200

1,600


6,420

8,939

-

2,500

5,000

7,500

10,000


2,851

5,537 5,537

2.3%48.1%

28.3%-

2,000

4,000

6,000

Acquiror Pre-Transaction

Acquiror Post-Transaction

Acquiror Post-Transaction & IPO

Potential Financial Effects (cont.)Potential Financial Effects (cont.)

Total Assets as at 30 June 2009 Shareholders’ Equity as at 30 June 2009

Cash and Cash Equivalent as at 30 June 2009

Total Debt and Net Gearing Ratio as at 30 June 2009



Note: (1) unaudited pro forma figures compiled by Ernst & Young(2) assume IPO proceeds of RMB4,000,0000,000 and before repayment of bank borrowings

(1) (1)

(1)

(2)

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Immediate Impact on EPS – Consideration Shares

Immediate Impact on EPS – Consideration Shares

EPS Enhancement

EPS Dilution

Target Assets 2009 Earnings (RMB million)

020406080

100120140160

3.10 3.54 4.14 4.96 6.20

Number of Consideration SharesNumber of shares will be determined pursuant to the following formula:

No more than 1,200 million shares

Target Assets 2009 Earnings

Impact on EPS (dilution)/

enhancement(RMB million)

80 (8.5)%

100 (5.4)%

120 (2.3)%

140 0.7%160 3.8%

＝Number of Consideration Shares

Initial Consideration (RMB2,805 million)

Issue Price of the A Share IPO

Issue Price (RMB)

Note: (1) based on pro forma combined trailing 12 month net profit of the Target Assets of approx. RMB86.0 million(2) assuming an issue price of RMB3.67, assuming i) the implied PER of the public A share issue is 29.74x, being the medium of PER of the peers in Bohai Rim Region; ii) trailing 12 month ending June 2009 EPS of the Company was 0.176.

2009 H1 earningsRMB70.9 million

2009 third quarter cargo throughputYoY growth 11.5%

2009 Earnings of the Target Assets will have Direct Impact on EPS

EPS Neutrality Analysis(1) EPS Impact at Different 09 Earnings(2)

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Transaction Type

Pre-TransactionHistorical Figures(PDA & Acquiror)

Post-Transaction Annual Caps

(PDA & Enlarged Group)2006 2007 2008 2009 2010 2011 2012

(RMB millions)To be provided by PDA to the Acquiror 46.78 45.36 37.81 - 66.02 67.06 65.73To be Provided by the Acquiror - 4.96 1.99 - 49.84 44.56 43.40

Upon Completion of the Acquisition, the CCT over Revenue of the Enlarged Group may reduce significantly.

Continuing Connected Transaction – Mutual Provision of Goods and Services

Continuing Connected Transaction – Facilities Design and Construction Services

Average CCT 2006-2008

2008 Revenue of Acquiror

Transaction Type

Pre-Transaction Historical Figures(PDA & Acquiror)

Post-TransactionAnnual Caps

(PDA & Enlarged Group)2006 2007 2008 2009 2010 2011 2012

(RMB millions)To be provided by PDA to the Acquiror 167.70 155.66 217.79 - 123.03 88.49 50.35

Total CCT 214.48 205.98 257.58 - 238.89 200.11 159.48

Average CCT 2010-2012

2008 Revenue of Enlarged Group (1)14.2%

Note: (1) add up revenue of the Acquiror and those of the Target Assets without making eliminations.

6.8%

slightly upsignificantly up

significantly down

CCT Revenue CCT Cost

Less Continuing Connected Transaction as a Percentage of Revenue

Less Continuing Connected Transaction as a Percentage of Revenue

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Stock Code: 2880.HK Landmark Transaction to Build the ... ppt Project 216.pdf · 5 The port of Dalian – the flagship of North-East Asia international shipping center − Total water