Sapphire enters into covered guarantee agreement with Shandong Hi-Speed Road & Bridge group

 

Shandong Listco is a listed company on the Main Board of the Shenzhen Stock Exchange (stock code:000498) and it is engaged in the business of undertaking infrastructure construction, including highways, bridges, tunnels, municipal works engineering, traffic engineering, ports and waterways.

 

As at 31 December 2019, Shandong Listco&rsquo s market capitalisation is approximately RMB 5.24 billion, with an order book of approximately RMB 22.1 billion. Based on Shandong Listco&rsquo s annual report for the 2019 financial year, the net assets attributable to its holding company amounted to approximately RMB 5.5 billion, and total assets approximately RMB 32.1 billion.

 

The controlling shareholder of Shandong Listco is Shandong Hi-Speed Group Co., Ltd. (&ldquo Shandong HSG&rdquo ), which holds 60.66% of the shares of Shandong Hi-Speed. Shandong HSG is a wholly-state-owned enterprise (&ldquo SOE&rdquo ) headquartered in Jinan City, Shandong Province of the PRC.

 

From a financial perspective, the proposed transactions has positive financial effects on the Group and in particular, the Group&rsquo s net tangible assets (&ldquo NTA&rdquo ) per share will increase from RMB cents 131.82 to RMB cents 155.51 (where retained interest in Ranken Railway is measured at fair value), and which the NTA of RMB cents 155.51 represents more than 5.6 times the closing price of the shares of the trading day prior to the date of this announcement and (ii) a gain of approximately RMB 58 million (where retained interest in Ranken Railway is measured at fair value).

 

And given its status as an indirect SOE following the proposed transactions, Ranken Railway would be placed in a more favourable position to secure project contracts in the PRC, and may be able to enjoy lower interest rates on external borrowings from financial institutions.

 

In addition, Ranken Railway currently faces strong competitive pressure in tendering for projects in the PRC, with most of the projects it has tendered for awarded to SOEs. Hence, as an indirect and partial SOE, Ranken Railway will be able to tender for key infrastructure projects in the PRC which require contractors or vendors to be state-owned which it was previously ineligible to participate, in addition to projects which it could previously access as a privately-owned enterprise.

 

Ms Wang Heng (王 恒 ), Chief Executive Officer of Sapphire, said,&ldquo While unlocking value for shareholders, we believe that this strategic divestment to Shandong Hi-Speed can significantly  enhance the value and prospects of Ranken Railway with the combination of both companies&rsquo capabilities and resources to tap new market opportunities in urban railway infrastructure and water environmental management projects.