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A Proposal for the Acquisition of Lanwei Expressway in Henan Province by Yuexiu Transport Was Endorsed by An Overwhelming Majority Vote

Date: 2022-11-18
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On the morning of November 18, 2022, Yuexiu Transport Infrastructure Limited (stock code: 01052.HK) held a special general meeting of shareholders. Chairman Li Feng presided over the meeting via video link. The meeting discussed the proposal for acquiring 100% of the equity of a company (“Target Company”) engaging in the operation of Lanwei Expressway in Henan Province, China through the company’s wholly-owned subsidiary from Yuexiu Group at a total price of 1.098 billion yuan. The proposal was finally passed at the meeting by as high as 99.98% of affirmative votes.

A Proposal for the Acquisition of Lanwei Expressway in Henan Province by Yuexiu Transport Was Endorsed by An Overwhelming Majority Vote

The Lanwei Expressway operated by the Target Company and approved by the shareholders’ meeting for acquisition is located in Henan Province. It is in line with the company’s explicit strategy for development in central China over the past years and is conducive to enriching the regional portfolio of assets and enhancing anti-risk ability while improving the project management scale in central China. Henan Province ranks first in central China and fifth in the entire nation in GDP and stays third in the country in terms of the total population. It is a province with a large population and abundant labor resources. It is an important comprehensive transport hub and a center for the flow of passengers, logistics and information in China. It has long been renowned for its superior geographical location in the Central Plains region and convenient transportation leading to ten provinces. The Lanwei Expressway is located in the core development area of the Central Plains Urban Agglomeration and is an important part of the Lannan Expressway in Henan Province. Thanks to its good location, the Lanwei Expressway will continue to benefit from the “Rise of Central China” and the regional development strategies for the construction of the Central Plains Urban Agglomeration and the Zhengzhou Metropolitan Area.

A Proposal for the Acquisition of Lanwei Expressway in Henan Province by Yuexiu Transport Was Endorsed by An Overwhelming Majority Vote

Since its opening to traffic in 2005, the Lanwei Expressway has been in operation for nearly 17 years. Now it is mature and creates a stable income. After the acquisition, it will increase the company’s revenue, profit and toll length. If we look back at history, we can see that the project has grown well, with a compound annual growth rate of about 11.65% from 2010 to 2019 (before the outbreak of the epidemic), and nearly 8% even in 2021.This year, the Lanwei Expressway has grown in the face of economic downturn and delivered excellent performance and higher growth in revenue and profit. The revenue was up by about 13.78% year on year and the pre-tax net profit increased significantly by more than 80% from January to July. It was really not easy to achieve such outstanding performance against the economic headwinds.

A Proposal for the Acquisition of Lanwei Expressway in Henan Province by Yuexiu Transport Was Endorsed by An Overwhelming Majority Vote

The internal rate of return of the acquisition is expected to reach 9.5%, a considerable return under the current economic environment. The total transaction price will be paid by internal financial resources and bank M&A loans. The company’s capital-loan ratio will only be slightly increased from 48.4% to 52.5%, leaving the financial robustness basically unaffected. In addition, Moody’s and Fitch respectively issued press releases saying that the acquisition of the Lanwei Expressway would not affect the company’s ratings.

The acquisition is a beneficial supplement made by Yuexiu Transport to its asset portfolio after the spinoff of Hubei Hanxiao Expressway to launch publicly-traded REITs, so as to increase its shareholder value. After the construction of the public REITs platform, Yuexiu Transport needs to more actively reserve high-quality projects and keep a balance between “in and out” of assets. The inclusion of the Lanwei Expressway in the listed company is a key measure taken by the company to implement the development strategy of the “14th Five-Year Plan”, and also an important practice to continuously promote the interaction between the three platforms.


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