Shenzhen Expressway Acquired Coastal Company at RMB1.472 Billion; New Income Source for Toll Revenue

HONG KONG —¬†Shenzhen Expressway Company Limited (“Shenzhen Expressway”, or the “Group”; Stock Code: 00548) announced that the Group has acquired 100% equity interest in Coastal Company from Shenzhen International Holdings Limited (SIHCL) at a consideration of RMB1.472 billion. Upon completion of the Acquisition, Coastal Company will become a wholly-owned subsidiary of Shenzhen Expressway.

Investment, construction, operation and management of toll highways and roads are within ordinary and usual course of business for Shenzhen Expressway. This acquisition of Coastal Company, subsequent to Shenzhen Expressway’s previous acquisition of 100% equity interest in Yichang Expressway, will further expand its road network layout, which, in turn, will consolidate and enhance its toll highway business.

Steady growth in long-term toll revenue and enhances performance vitality

Guangshen Coastal Expressway is an important core passage going through the north-south of the Pearl River Delta region and enjoys an economically viable neighbourhood region. With the steady development of the regional economy along the Coastal Project and the constant improvement of its surrounding road networks, the operating performance of Coastal Project will have a rapid growth, bring stability and good toll revenue for the Company. After the completion of the transaction, Coastal Company will be included into the consolidated financial statements of the Group. Supposing the date of consolidation as 1 March 2018, it is estimated that the transaction will increase a revenue of RMB442 million in 2018. In 2038, the Coastal Project will contribute annual revenue of RMB1.4 billion, and long-term income will be considerable.

The Group’s management said that “in the long run, the acquisition of 100% interest in Coastal Company will help to enhance the business scale and profit base and contribute to steady growth of cash flow for Shenzhen Expressway. The Acquisition will further strengthen the core strengths of Shenzhen Expressway in the investment, management and operation of highways, and in line with the development strategy and overall interests of Shenzhen Expressway as a whole. The Acquisition is the result of the negotiation between the Group and SIHCL which Shenzhen Expressway has seized the favourable market opportunity. It is a win-win proposal which fully demonstrated the positive attitude of SIHCL in supporting Shenzhen International and Shenzhen Expressway’s development and strengthened the positive image of SIHCL in keeping its commitment.”

Crucial corridor to Guangdong-Hong Kong-Macau Greater Bay Area; Superior prime position induced economic development

Guangshen Coastal Expressway (Provincial Line S3) is an important channel connecting Guangzhou and Shenzhen, and Guangdong and Hong Kong. It has a total length of approximately 90km connecting Huangpu District in Guangzhou and Nanshan District in Shenzhen. Coastal Project is the Shenzhen section of Guangshen Coastal Expressway, extending from Dongbao River, the boundary between Dongguan and Shenzhen, to Nanshan District, Shenzhen and connecting with Shenzhen Western Corridor in the south. Coastal Project is a dual eight-lane expressway with the total mileage of approximately 37 km. It is comprised of two phases. Coastal Phase I is on the main line of Guangshen Coastal Expressway. It has a toll mileage of approximately 30.9 km and was opened to traffic on 28 December 2013with a toll collection period of 25 years. Coastal Phase II includes the connection line on the Shenzhen side of Shenzhen-Zhongshan Channel, Airport Interchange, International Convention and Exhibition Center Interchange, etc., with a total length of approximately5.7 km. The construction of Coastal Phase II commenced in December 2015 and is scheduled to be opened to traffic by end of 2019.

According to the Coastal Project investment and financing plan approved by the Shenzhen Government, the estimated total cost of Coastal Project is approximately RMB16.7 billion. The government shall contribute RMB10.3 billion and Coastal Company shall contributeRMB6.4 billion, which shall be financed by bank loan after pledging its toll-collection right to such bank. The transaction price of about RMB7.5 billion, including the purchase price of shares, bank loans and the construction funds of Coastal Phase II.

Good performance in the first three quarters

In the first three quarters of 2017, Shenzhen Expressway’s revenue maintains a steady growth, recorded revenue of RMB3,371 million, representing a YOY increase of 6.00%; recorded net profit of RMB1,211 million and earnings per share of RMB0.555, representing a YOY increase of 27.91%.Toll revenue is the main source of the Group, the Group achieved toll revenue of RMB3,177 million from January to September 2017, representing a YOY increase of 15.76%, in which the aggregate toll revenue contributed from consolidation of Shenchang Company and Yichang Company amounted to approximately RMB200 million.

Proposed issuance of the A Share CB optimized capital structure and enabled future positive growth

Previously, the Group announced to propose the public issue of A Share convertible bonds (CB) and the total amount of A Share CB to be issued should not exceed RMB2.2 billion, while the total proceeds from which would be applied in the construction of Shenzhen section of Shenzhen Outer Ring Expressway (Coastal Expressway to Shenshan Expressway session). The issue of A Share CB can broaden the Group’s equity financial channels, enhance its capital strength, which allows the Group to optimize its capital structure, maintain its financial flexibility, enhance follow-up development capability, provide financial support for strategic implementation and facilitate its healthy development in the future.

The Group’s management also said that the Group will continue to consolidate and enhance the toll highways main business, while further integrating resources. The Group will actively promote and implement new industrial investment, in order to eventually realize long-term healthy development and create more value for shareholders.