Chi­nese open new fron­tier in rail­way

China Daily (Canada) - - FRONT PAGE - By BLOOMBERG

The Chi­nese are not rest­ing on their lau­rels in their quest to dom­i­nate the global rail­tech­nol­ogy in­dus­try: They have also set their eyes on the high­mar­gin sig­nal­ing busi­ness.

China Rail­way Sig­nal & Com­mu­ni­ca­tion Corp made its list­ing de­but on Fri­day in Hong Kong af­ter rais­ing HK$11 bil­lion ($1.4 bil­lion) in an ini­tial public of­fer­ing that val­ues the com­pany at about HK$55.1 bil­lion. Shares rose 0.3 per­cent on Fri­day to HK$6.32.

The State-owned com­pany said it will use about 20 per­cent of the pro­ceeds from its IPO on do­mes­tic and over­seas ac­qui­si­tions, while spend­ing an un­spec­i­fied por­tion on long-term re­search and de­vel­op­ment.

“China’s Belt and Road Ini­tia­tive is bound to ben­e­fit the com­pany, help­ing it to start ex­pand­ing its over­seas busi­ness,” said Jay Huang, a San­ford Bern­stein an­a­lyst in Hong Kong.

He was re­fer­ring to a de­vel­op­ment frame­work the Chi­nese gov­ern­ment un­veiled in Oc­to­ber, 2013, that aims to build new eco­nomic links re­trac­ing the an­cient Silk Road trad­ing route.

The Bei­jing-based firm’s fundrais­ing ef­fort comes amid a ma­jor push to mar­ket Chi­nese rail­way tech­nol­ogy over­seas, es­pe­cially in emerg­ing mar­kets.

Rail was listed in March as one of the 10 fo­cus in­dus­tries in a blue­print to make China into an ad­vanced in­dus­tri­al­ized econ­omy, with the gov­ern­ment us­ing rail­road com­pa­nies to win lu­cra­tive con­tracts.

State-owned CSR Corp and CNR Corp com­bined in May to form CRRC Corp, a train equip­ment maker that dwarfs ri­vals in­clud­ing Siemens AG and Al­stom SA.

The merger aimed to cre­ate economies of scale to help China com­pete more ag­gres­sively for over­seas rail deals.

On Fri­day, CRCC High-Tech Equip­ment Corp, a Chi­nese maker of large rail­way track main­te­nance ma­chines, also filed pre-list­ing doc­u­ments with the Hong Kong Stock Ex­change. The com­pany plans to raise as much as $400 mil­lion, IFR Asia re­ported.

China Rail­way Sig­nal’s trans­porta­tion con­trol sys­tem en­ables au­to­matic con­trol of train speed and of the spac­ing be­tween trains, im­prov­ing safety and ef­fi­ciency, Bern­stein’s Huang wrote in an Aug 5 note.

The busi­ness uses ad­vanced tech­nol­ogy, has high mar­gins and of­fers mod­er­ate growth po­ten­tial over the next five years, he said.

Other rail-sig­nal mak­ers have been ex­pand­ing mar­ket share re­cently. In Fe­bru­ary, Toky­obased Hi­tachi Ltd agreed to buy Fin­mec­ca­nica SpA’s rail busi­ness and a sig­nals af­fil­i­ate, its largest over­seas ac­qui­si­tion ever.

The bulk of Hi­tachi’s deal was for Fin­mec­ca­nica’s sig­nal­ing busi­ness, An­saldo STS SpA. Siemens and Al­stom also have been ex­pand­ing in that mar­ket in the past three years, seek­ing to cap­ture lu­cra­tive ser­vice and re­place­ment con­tracts.

Chal­lenges re­main in China’s push to spread its rail tech­nol­ogy glob­ally. Among them is the is­sue of safety.

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