MTR Corporation Ltd. (IPO Fact Sheet) (September 21, 2000)

MTR Corporation Limited

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Listing information

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The privatization share offer of the MTRC is regarded as one of the most significant IPO exercises in Hong Kong by investors in the year 2000 in terms of its offer size, company quality and value enhancing potential. The international offering may also be undertaken in the form of American depositary shares (ADSs). Each ADS entitles to 10 ordinary shares. Information contents hereby are for reference purposes and subject to alteration.

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Key Data

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Global offering

1,000,000,000 shares

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International offering

800,000,000 shares

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Hong Kong offering

200,000,000 shares

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Offer price

HK$8.00 to $9.38

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Total fund raised

HK$8b to $9.38b

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Market capitalization

HK$40b to 46.9b

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Estimated P/E for FY00

11.1x to 13x

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Net earning forecast for FY00

HK$3.6b

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Stock code

66

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Joint global coordinators, lead managers and bookrunners

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Goldman Sachs (Asia) L.L.C.

HSBC Investment Bank Asia Limited

UBS Warbury

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Time Table

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Application open

25th September 2000

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Application close

28th September 2000

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Pricing

4th October 2000

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Results of allocation

4th October 2000

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Trading

5th October 2000

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Refund

Before 9th October 2000

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About the company

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The company is a foremost public transport operator and has a 50-year exclusive franchise, commencing on 30th June 2000, of operating right to the Mass Transit Railway in Hong Kong under the MTR ordinance. In addition, the company is also an active participant in the development and sales of both residential and commercial properties locally.

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Competitive advantage

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The company is currently running one of the world¡¦s most profitable, cost efficient and reputably safe metropolitan railway.

It enjoys an exclusive right in operating the railway and so faces no competition in its kind of service provided.

The company is well positioned to benefit from government transport planning strategy as well as Hong Kong¡¦s economic and demographic development. It also has the full support from the government who is still a controlling shareholder after the floatation.

The company¡¦s railway associated property development projects possess a great earning potential for their proximity and convenience to the main stream transport lines.

The company¡¦s management team is professional and experienced. Their integrity in business management has won an excellent reputation in the international capital market, which is very helpful in financing for future developments.

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Future Plans and prospects

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The company strives to provide a world class railway services in conjunction with high quality property projects for Hong Kong.

Extension of railway network when needs and opportunities arise on a timely and cost efficient basis.

Delivery of an affordable, reliable, safe and environmentally friendly rail transport services in order to make it the best choice for passengers.

Leveraging on its property business and taking the location advantage of its development sits, the company is well positioned to secure premier sit reserve.

Financially the company adopts a prudent policy in tackling its gearing ratio and asset quality in order to maintain its strong financing capabilities in local and international capital market.

Offering share option scheme to employee as to encourage incentives.

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Summarized financials

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HK$M

1997

1998

1999

2000E

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Turnover

6,574

6,981

7,252

10,878

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Net Profit

2,783

2,819

2,116

3,600

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NAV/share (HK$)

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15.88

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Use of proceeds

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The company will receive no proceeds from this flotation. The Hong Kong government will receive all proceeds in this privatization exercise.

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Opinion

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In view of the steady growth in the local population, coupled with a mature and reliable public transportation network, the company is anticipated to take most of the advantage of the strong demand for public transportation.

With respect to property development, the company just awarded the Kowloon Station Development Package 5 to 7 in June 2000 to SHKP. The package weighted the Company¡¦s asset basket by an additional HK$31.687B with great profit prospect which is yet to be included in its full FY00 income statement. Therefore, its future earning potential is expect to be stable and optimistic.

We strongly recommend investors to subscribe and hold for long term investment as issue price is set at a large discount to its NAV. Furthermore, The company has the advantage over other property developers because it awards its property projects to third parties and shares profit. It does not involve any cost risks arise from the complex construction processes.

Also, the company has lower PER and higher dividend yield rate than other property groups which have an average PER of 18x and yield rate of 2.5% comparing to MTRC¡¦s 12x and 4.5%. Therefore, MTRC¡¦s issue price can be regarded as a comfortable bargain relatively speaking. We further anticipate a 12-month target of $15 to $18.

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