HONG KONG RESEARCH
Analyst: Stanley Lau 18th April 2006
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this document nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of
any kind or form whatsoever. The information is based upon information, which we consider reliable, but accuracy or
completeness is not guaranteed. Opinions expressed herein are subject to change without notice. At time of this report,
East Asia Securities Company Limited has no position in securities of the company or companies mentioned herein, while
its group companies may from time to time have interests in securities of the company or companies mentioned herein.
Main Board H-share Listing - Research
大連港股份有限公司
Dalian Port (PDA) Company Limited [Stock Code: 2880]
Sole Global Coordinator and Sole Sponsor : BNP Paribas Peregrine
Joint Bookrunners and Joint Lead Managers : BNP Paribas Peregrine, UBS
Sector : Transportation
Business : Oil and container port operator in Dalian
Total share offer: 840,000,000 H shares
(30% of the enlarged share capital)
Public Offer: 84,000,000 H shares (10%)
Placing: 756,000,000 H shares (90%)
Greenshoe: 126,000,000 H shares (15%)
Price: HK$2.175 - HK$2.575 per H share
Market Cap.: HK$2.01 billion - HK$2.38 billion
Pro Forma FY2005 P/E: 15.1x - 17.9x
Adjusted NTA per share: HK$1.42 - HK$1.54
Staffing: 1,873
Book opens: 10th April 2006
Book closes: 21st April 2006
HK Public Offer period:
18th April 2006 - 21st April 2006
Receiving bank: Standard Chartered Bank,
ICBC (Asia)
Share registrar: Computershare Hong Kong
Investor Services Limited
Listing date: 28th April 2006
Business of Dalian Port (PDA)
The Group is an oil and container port operator with
a dominant market share in Dalian. Its three main
businesses are: (i) the provision of terminal and
logistics services for oil products and liquefied
chemicals; (ii) the provision of terminal and logistics
services for containers; and (iii) the provision of port
value-added services including tugging, pilotage,
tallying and IT services.
Headquartered in the deep-water port of Dalian, the
Group is the largest oil terminal operator in
Northeastern China in terms of throughput. For the
year ended 31st December 2005, the total annual
throughput for oil of the Group was approximately 32
million tonnes, of which approximately 18.3 million
tonnes were attributable to crude oil and
approximately 13.7 million tonnes were attributable
to refined oil and liquefied chemicals.
In terms of the container business, the Group
commanded a market share of more than 70% of
the container market and over 90% of the total
container throughput for foreign trade at ports in
Northeastern China. For the year ended 31st
December 2005, the total throughput of the
container terminals operated by the Group was
approximately 2.6 million TEUs.
Major Shareholders after Listing (Assuming the over-allotment option is not exercised)
Dalian Port Corporation Limited 65.325%
Dalian Haitai Holdings Company Limited 0.335%
Dalian Rongda Investment Company Limited 0.670%
Dalian Detai Holdings Company Limited 0.335%
Dalian Bonded Zhengtong Company Limited 0.335%
The National Social Security Fund Council 3.000%
70.000%
Note: Japan’s NYK, China Shipping Group, Singapore’s PSA and Hutchison Whampoa (stock code: 0013) have agreed to
buy 4.1%, 4%, 1% and 1% respectively of the Group’s enlarged share capital through the share offering.
2
Use of Proceeds
Net proceeds from the offer are estimated to be HK$1,895.8 million.
(Assuming the over-allotment option is not exercised, and at an issue price of HK$2.375 each, being the midpoint
of the indicative price range)
HK$ million
Construction of 12 crude oil storage tanks 653.8
Construction of 4 new container berths 384.6
Acquisition of 8 tugboats 259.6
Repayment of long-term bank loan 413.5
General working capital 184.3
Financial Highlights
Year ended 31st December
2003 2004 2005
RMB’000 RMB’000 RMB’000
Turnover 941,821 1,102,749 1,269,376
Gross profit 481,893 556,322 645,612
Profit before tax 393,591 420,506 475,688
Net profit 354,784 367,878 419,655
EPS - Basic RMB0.18 RMB0.19 RMB0.21
RMB’000 RMB’000 RMB’000
Owner’s equity 1,649,134 1,977,736 2,443,882
Strengths/Opportunities
Dalian is one of the four designated locations for strategic oil reserves bases in China due to its proximity to
Northeastern China’s refinery base. The Group’s oil terminal located in Xingang is the only terminal
approved by the Ministry of Communications to conduct the transshipment business of imported crude oil
for petrochemical enterprises in Dalian port and Bohai Bay. As a result, the Group is well positioned to take
advantage of the growing demand for oil resources in China.
Dalian port is located at the entrance of Bohai Bay and is closer to major international shipping routes than
other ports in Bohai Bay, allowing vessels to enjoy shorter sailing times to major ports worldwide. Dalian
port’s shipping routes also provide an important access to small and medium-sized ports in the coasts of
Northeastern China for transshipment to and from international destinations.
In terms of the container business, the Group provides a comprehensive package that not only includes
container loading and discharging services, but a number of logistics services as well. The services, which
include the operation of a bonded logistic park, have enabled the Group to establish strong business links
with over 40 shipping companies.
Priced at 15.1x to 17.9x FY2005 P/E, valuation of the counter is not demanding compared to 18x for
Xiamen International Port (stock code: 3378).
Weaknesses/Threats
× As of 31st December 2005, the Group had outstanding debt of approximately RMB4.22 billion and a net
debt to equity ratio of 158%. The Group expects the ratio to be lowered to about 90%, a level more in line
with the industry’s average, after listing as it has earmarked HK$413.5 million of the IPO’s proceeds to
repay long-term debt.
× The Group enjoyed tax exemptions of RMB88.3 million, RMB83.9 million and RMB94.8 million for the three
years ended 31st December 2005 respectively. The tax exemption ceased on completion of the Group’s
reorganisation and this would have an impact on the Group’s after-tax profitability.
Recommendation: Trading Buy