China New Town Development Co. Ltd Plays A Pivotal Role in China Development Bank's Strategic Layout of New Urbanization
Urbanization is the most important part of China's national policies in recent years. Although its 1st and 2nd tier cities are rather developed, the country's urbanization rate still has tremendous potential to rise as compared to the developed world. Among all the companies listed on Hong Kong Stock Exchange, there is a company engaged in integrated new model of urbanization - China New Town Development Co., Ltd. ("CNTD", Stock Code: 1278.HK). It has emerged as a supernova in the country's new town development, particularly since China Development Bank's ("CDB") takeover. With CDB's active support in CNTD's project development and financing, CNTD takes up its mission as a unique and important platform for promoting the urbanization process of China.
The acceleration of urbanization process makes the redevelopment of shanty town areas imminent.
In the 18th National Congress, China Communist Party clearly indicated that China is determined to innovate its own new model of urbanization, to focus on promoting cohesive developments of each tier of cities and towns, integrating industrial development with town developments, promoting coordinated developments between cities and new towns and enhancing municipal capacities. Since then, urbanization was upheld as a core national policy. The "National New-type Urbanization Plan (2014-2020)" published in March 2014 put forward that China's permanent population urbanization rate to reach 60%, and the urbanization rate by household registration to reach 45%, respectively, by 2020, as part of an initiative to create the environment for 100 million agricultural population to relocate and settle. Being the largest development finance institute in the world, CDB rides on the national strategy and plays a dominant role in the entire process. In 2014, the State Council procured People's Bank of China to provide a RMB 1 trillion loan to CDB. The loan will be used on shanty town redevelopment projects nationwide. Last year, CDB released RMB400 billion loans on shanty town redevelopment projects nationwide, which represented over 90% of such loans in China.
As CDB takes up the role as the pillar in financing shanty town redevelopment projects, no doubt it has abundant access to first-hand business opportunities of quality projects. On 28 March 2014, China Development Bank Capital Corporation Limited ("CDB Capital"), a wholly-owned subsidiary of CDB, subscribed 54.3% of the shares of CNTD. CNTD, thereafter, became the sole listed and operational platform in CDB and CDB Capital's new model urbanization related businesses, to consolidate the downstream new town development businesses available to CDB. The rationale behind CDB's acquisition of CNTD was not merely a commercial M&A but an essential part of CDB's new urbanization business blueprint.
By combining CNTD's operations and expertise on new town development and CDB Capital's advantages in project resources and brand awareness, CNTD is uniquely positioned to grow as a nationally-known brand for new urbanization and the core operational platform of CDB Capital.
As the urbanization process continues to improve, urbanization will become more and more important engine that sustains the balanced growth of China's economy. Meanwhile, the market of "Smart City" which integrates low carbon, environmental friendly, technology with sustainable lifestyle has attractive potential. With CDB Capital's vigorous support, CNTD is now equipped with all the essential elements of success to take off in this new era of urbanization.
CDB Capital's strategic subscription and continued involvement and support
CNTD was listed on Singapore Stock Exchange in November 2007 and became primarily dual-listed on Hong Kong Stock Exchange by way of introduction in October 2010. It has 13-year experience of township development and has accomplished quality projects. In 2013, CNTD announced that 5.348 billion new shares would be issued to CDB Capital, and after the completion of the transaction, CDB Capital holds more than 54% interest in CNTD and becomes its controlling shareholder.
Since its establishment, CDB has continuously supported China's urbanization and infrastructure and has developed in-depth cooperation with each level of the Chinese government. When CNTD became a member of CDB, it did not only inherit CDB's extensive network throughout the entire country, but also the elite top management of CDB Capital to participate in the company's daily operations and management.
Through CDB Capital's introduction, CNTD successfully launched the Nanjing Yuhuatai Project last November. Nanjing Project is a top-quality project in CDB Capital's project portfolio with excellent location (central location in Nanjing), guaranteed return on investment (strong fiscal credit of Nanjing government) and quick land sale cycle (land secured within one year upon project launch). Nanjing project includes Yuhuatai District Tiexin Bridge - Xishan Bridge Regional Urban Re-development Project and Software Valley South Park Development Project, which aims to build a modern urbanization model underpinned by high-end industries, commercial and leisure, culture and tourism, as well as living functionalities.
CNTD explores a new project development model by launching the Twin Bridges Project. The Project adheres to CDB's business objectives of promoting urbanization-related constructions and fully aligning to the national policy on city transformation and new urbanization, namely "integrating industrial and township development". With such attractive potential, the Twin Bridges Project is expected to inject momentum into CNTD's project portfolio and propel the Group's revenue growth.
CDB Capital's vigorous credit support enhancing CNTD's financing capability
In addition, CNTD has announced two financing arrangements recently. On 21 April 2015, a subsidiary of the Company, Shanghai Golden Luodian, has obtained project development loan from ICBC, among which the first batch RMB 260 million of 5 years term was secured at or below the benchmark PBOC rate. The loan was unconditionally guaranteed by CDB Capital.
In addition, on 29 April 2015, the company announced that it completed an issuance of guaranteed notes at an offering size of RMB1.3billion. The guaranteed notes, with tenor of 3 years, was issued at coupon rate of 5.5%. The net proceeds, amounting to approximately RMB1.293billion, will be used for general corporate working capital. The deal is reported to be one of the largest RMB bonds in Hong Kong this year. CDB Capital supported CNTD's credits through a keepwell and liquidity support deed and a deed of equity interest purchase undertaking. This is the first time ever that CDB Capital provides such strong support to its subsidiaries for a public bond issuance. The transaction reflects the level of support CDB Capital commits to the Company, and its unique role within the CDB system.
With the support from the CDB system, CNTD has accomplished multiple milestones. It enjoys privileged positions in terms of support in financing, business development and management talents. Soon the Company shall make remarkable contribution to China's urbanization process and become a leading force in shanty town redevelopments nationwide.
