IPO | Beijing-Shanghai High-Speed Railway Co. Ltd explores possible IPO

China’s Beijing-Shanghai high-speed rail operator to go for public float.

Source: Unsplash.

Beijing-Shanghai High-Speed Railway Co. Ltd, the unit that’s responsible for the Beijing-Shanghai high-speed railway, is ready to conduct a public float, as a pilot project in the country’s push for its ‘asset securitization’ plans as Beijing engages in a national campaign to reduce corporate debt.

While the firm that has abundant cash flow and there is no rush to seek a public float, there is also investor pressure from Ping An Asset Management and a national security fund – with 20 per cent ownership of the company – for the public listing, according to people familiar with the matter. No stock exchange has been identified for an initial public offer (IPO).

Launched in 2011, this Beijing-Shanghai rail line that’s largely owned by China Railway Corp. (46 per cent) and is one of China’s few high-speed routes that is profitable.

One of its shareholders, Tianjin Railway Construction Investment Corp Ltd, reported that the firm earned a net profit of RMB 6.5 b at the end of 2015, just 4 years after. Specifically, a profit of RMB 79 can be made per train ticket for this $33 b high-speed rail that is said to be able to half the traditional train journey ride from Beijing to Shanghai.

The construction of the 1,318-kilometre railway that began in April 2008 led to a massive expansion in China’s railway sector. By December 2017, China already has 25,400 kilometres of high-speed lines, a whopping 20 per cent of the nation’s total railway tracks. The entire project cost RMB 220.9 billion ($33.45 billion) to build. Currently, there are 24 stations along this Beijing-Shanghai line and the train can travel up to 350 kilometres per hour.

China’s investment-led development of its railway infrastructure to be lower in cost and more efficient has seen it surpass Japan in this domain. However, Chinese railway technology has also been plagued by allegations that it was developed through the copying of Japanese bullet train technology.

The development of the railway infrastructure has seen the rail operator accumulate substantial debt; the company reported a debt-ratio of 65 per cent in March 2018, increasing to RMB 5.04 trillion, up from RMB 4.72 trillion in 2017.

The Beijing-Shanghai high-speed rail costs much more than railway projects such as the Qinghai-Tibet Railway, the Beijing-Kowloon Railway, and the Zhengxi High-speed Railway, with a kilometre of track costing an estimated RMB 160 million, according to a research report from Guotai Junan Securities Research Institute.

Editor: Shiwen Yap