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Edited Transcript of 1199.HK earnings conference call or presentation 29-Aug-19 11:30am GMT

Half Year 2019 COSCO SHIPPING Ports Ltd Earnings Call

Central Sep 6, 2019 (Thomson StreetEvents) -- Edited Transcript of COSCO SHIPPING Ports Ltd earnings conference call or presentation Thursday, August 29, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ricky Ng

COSCO SHIPPING Ports Limited - GM of IR

* Margaret Su

COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance

* Zhang Wei

COSCO SHIPPING Ports Limited - Chairman & Managing Director

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Conference Call Participants

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* Parash Jain

HSBC Hong Kong - Analyst

* Maggie Shun

Harris Investment Management - Analyst

* Robin Xu

UBS - Analyst

* Kelvin Lau

Daiwa - Analyst

* Kelvin Wong

JPMorgan - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for joining COSCO SHIPPING Ports Limited 2019 first-half results announcement conference call. (Operator Instructions). I would now like to hand the conference over to the speakers Mr. Zhang Wei, the Chairman and Managing Director of the Company; and Mr. Ricky Ng, General Manager of Investor Relations Department; and Ms. [Margaret Su], Executive Deputy General Manager of Finance Department. Please go ahead.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [2]

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Welcome to COSCO SHIPPING Ports' first-half 2019 results presentation. Our presentations will mainly focus on three sections: first, financial highlights; second, operational review; third, strategies.

Now let's move to the first half financial highlights, slide number 4. Our financial fundamentals are sound amid external challenges, considering nowadays negative impacts, including Sino-US trade tensions and global economic slowdown, our revenue growth recorded 4.5% year-on-year increase in first-half 2019.

The gross profit slightly dropped by 2.6% year-on-year. One of the reasons is due to the depreciation cost of (inaudible) in [Xiamen] terminals. In fact, if we exclude the one-off loss of share dilution effects from QPI and accounting loss of HKFRS 16, our adjusted net profit attributable to shareholders increased by 4.4% year-on-year in the first half. In general, despite external challenges such as global economic growth concerns, our stable fundamentals and (inaudible) strategies support our long-term sustainable growth.

Let's move to the next slide. The exposure of terminal profits were well diversified. Terminal profits across the portfolio [which] increased 4.1% year-on-year to USD203.5 million in the first half 2019. That was supported by the balanced regional contributions. Our top 10 terminals account for 76.7%, which remains nearly unchanged. With that, our subsidiaries including PCT and Guangzhou Nansha terminals, driven by higher throughput growth, contributed a greater proportion out of 49 terminals. Our terminal profits have become more diversified worldwide.

Let's move to slide number 6. Our balance sheets is healthy as net debt-to-equity ratio was 32.8% at the end of June 2019, and the average bank borrowing cost remains relatively low at 3.53%. Overall our financial position [strength] could support ongoing and sustainable growth.

Next we will share the operational review with you all. Our total throughput increased by 5.4% year-on-year while equity throughput grew 7.7% year-on-year in the first half 2019. Volume growth from subsidiaries outperformed that from non-subsidiaries in the first half as the strategy of control is proven effective. Equity throughput from overseas accounts for 32% and you see the higher proportion compared to first-half 2018 and it is in line with our globalization strategy.

Now let's move to the strategy section, slide number 10. After the restructuring in 2016, we have been focusing on three strategies: globalization, synergy and control. Our aim is to build a global terminal network. We are leveraging the synergies with COSCO SHIPPING, the OCEAN Alliance and other alliance. With more subsidiaries we are able to adopt more efficient management and information system, attract Navis and more systems to our terminals.

So far we have achieved that equity throughput from overseas increased to 32% in the first half. Total throughput from Shipping Alliance increased to 84.4% in the first half 2019. Also, equity throughput from subsidiaries increased to 40.8% in the first half 2019. We are confident that these strategies could sustain our long-term growth.

Now let's move to slide number 11. Our equity throughput from overseas increased to 32% in the first half 2019, along with acquiring good quality assets after 2016 restructuring. One of our strategies, globalization, is to pursue global investment opportunities with considerations to balanced portfolio of brownfield and greenfield projects, hurdle rate at least low double-digit equity IRR, and potential divestment of nonperforming assets for capital recycling.

Now let's move to slide number 12. By leveraging synergies with COSCO SHIPPING, OCEAN Alliance and other alliance, our total throughput of our seven major subsidiaries grew 12.5% year-on-year in the first half. Meanwhile stronger linkage effects have started kicking in between our terminals and Shipping Alliance. The volume contributions from 2M+ THE Alliance increased by 19.7% year-on-year. Especially Hapag-Lloyd, one of the members from THE Alliance, grew 107.8% year-on-year in the first half 2019.

Our synergies with all Shipping Alliance members have become stronger to boost our throughput growth. In fact, our subsidiaries increased from 10 to 16 as the first half 2019, which accounted for 40.8% of all equity throughput out of 49 terminals. We see the increasing contributions from subsidiaries.

Now let's move to the slide number 14. With more subsidiaries within our group we are able to improve efficiency and reduce cost through the application of Navis N4 system. As far as we have implemented CSP Zeebrugge terminal which already launched Navis N4 system in July, it is also expected that Lianyungang terminal will launch Navis N4 system in the second half of this year and followed by more subsidiaries are expected to launch in the coming three to four years.

We are actually on the right track to achieve our five-year target. Our vision in 2021 is to build a global terminal network with more subsidiaries that are creating strong linkage effects with all shipping alliance. We expect to generate high return from existing portfolio, further improve asset quality after portable M&A and potential divestments.

Now let's move to slide number 16, our adjusted net profit attributable to shareholders slightly decreased by 4.7% year-on-year after excluding one-off loss of share dilution from QPI, accounting loss of HKFRS 16 and fair value gain of Beibu Gulf after withholding tax. Despite loss for our new terminals in the initial stage, mainly due to depreciating costs, we could still maintain relatively stable profit in the first half 2019.

Benefiting from the synergies with Shipping Alliance, we see utilization starts to pick up. Nantong terminal's throughput reached 742,000 TEU since commercial operations to June 2019; and we also expect CSP Abu Dhabi terminal's throughput could reach 400,000 TEU by end of 2019. We expect greenfield projects could be important profit growth driver in the long run. We believe we are gearing up for growth.

Slide number 17. On this slide our achievement so far is on the right track of our five-year plan. Our ROE reached 6.3% in 2018, has maintained an upward trend since 2016 restructuring. Excluding a one-off loss of QPI dilution effect, the ROE in the first half 2019 was 3.38%.

Our 2019 equity throughput guidance is to achieve high single-digit growth, excluding the throughput from QPI. Taking into account of challenge of Sino-US trade tension, opportunities of more exports due to the depreciation of RMB and low interest rate environment, we remain cautiously optimistic for the rest of 2019.

Now we move to slide number 19. We expect there are some potential drivers or catalysts. First, throughput growth upside on the back of OCEAN Alliance and contribution from newly acquired ports; second, growth potential arising from diversification into value-added ports-related business; and third, possible value accretive acquisitions and potential divestments.

The challenges we are facing in 2019 could be: first, Sino-US trade tension; second, depreciation of currencies; and third, impact of HKFRS 16. Regarding to the Sino-US trade tension, our subsidiaries throughput has limited exposure to the US trade lines. Regarding to the risk of the currencies depreciation, we adopt the natural hedge by borrowing local currency. Overall our 46% consolidated revenue came from RMB and the rest of it came from euro. Regarding to the HKFRS 16, we expect its non-cash impact to be less than USD20 million in 2019.

Here comes to the Q&A section. (Operator Instructions). Thank you, operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Parash Jain, HSBC Hong Kong.

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Parash Jain, HSBC Hong Kong - Analyst [2]

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Thank you and thanks, Ricky, for a very clear presentation. I have two questions. First, looking at your slide, the revenue exposure that you talked about, that 46% in RMB and the remaining in euro, given the strength in the US dollar, particularly beginning third quarter, I was under the assumption that the port revenues are in local currency. Your reporting is in US dollars. Would it not be dilutive to the earnings? If you can help me correct my understanding.

And my second question is that in the first half you had this $20 million of gain from this terminal, [Beilin] Gulf. How should we -- Beibu Gulf. What is it about? Isn't it more like a one-off or a fair value non-cash gain? So, if you can answer these two questions, please. Thank you.

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [3]

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Thank you. Hi, this is Margaret from the Finance Department. Regarding your first question related to the revenues, as we have -- the revenues is RMB or in euro for us. For our consolidation we will translate the currency into US dollars, and we will be reflected -- that will be a decrease in our revenue in case the RMB is depreciation.

I can give you some of the information for last year the whole year. We have around USD300 million related to the RMB revenue. Second is that [in case there is a] 1% depreciation in revenue -- in RMB, there will be an impact of around USD3 million. Yes, for your information.

And another question is related to the Beibu Gulf port. This is -- the income is related to the fair value change. This is -- the market value of these shares between the end of June and between the -- last year's year-end.

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Parash Jain, HSBC Hong Kong - Analyst [4]

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So, you don't recognize the profit from the operations from this investment, is it?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [5]

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No. We have not actually picked up the profits from these shares. We will only record two parts. The first part is the fair value change of these shares and the second part is the actual [dividend] income we see from these companies.

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Parash Jain, HSBC Hong Kong - Analyst [6]

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Okay. So, the fair value will keep changing every time you announce the results, right?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [7]

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Yes.

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Parash Jain, HSBC Hong Kong - Analyst [8]

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Okay. Fair enough. Thank you so much.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [9]

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So, that's why we have [a cleared down] -- we strip off this fair value gain of Beibu Gulf after the withholding tax in our slide number 16.

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Parash Jain, HSBC Hong Kong - Analyst [10]

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Yes, I was just thinking that should we not consider this as a non-reckoning?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [11]

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Actually we have called two kinds of the shares. One is financial asset as fair value through P&L centralized at Beibu Gulf port. And the other is financial asset at (inaudible) through the other convert in income. (inaudible) from our management on the (inaudible).

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Parash Jain, HSBC Hong Kong - Analyst [12]

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Okay. Can you remind me your stake in Beibu Gulf?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [13]

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The stake in Beibu Gulf is around 4.34%.

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Parash Jain, HSBC Hong Kong - Analyst [14]

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Perfect, thank you.

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Operator [15]

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[Maggie Shun], [Harris Investment Management].

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Maggie Shun, Harris Investment Management - Analyst [16]

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First of all, on your guidance for the equity throughput growth, you previously guided to low double-digit back in -- after the first-quarter result, and now you are guiding high single. I just double check if this is for the like-for-like organic growth, or does it include the new ports as well?

My second question is on the CapEx. What was your total CapEx spending for the first half of this year?

And the third question is regarding the disclosure. Looking at your presentation back in the second quarter last year, and you disclosed about the breakdown of the sales and cost of sales. So, I was able to tell the like-for-like growth for revenue and cost, but you didn't provide this time. Can you give me an indication what is your like-for-like revenue growth and what was your cost if you exclude the newly acquired ports?

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [17]

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The guidance we previously talk about is the total throughput growth low double-digit. And now we think that equity throughput is more relevant to our profit. So, that's why we change it to equity throughput growth guidance to be high single-digit growth.

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [18]

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And Maggie, this is Zhang Wei, the Chairman of the Company. I want to add one comment on top of this question. The adjustment of this guidance is also response to the actual reality in the current market. We realize that overall the market is a little bit slow.

And we want to be -- although we are neutrally optimistic, but we want to be more realistic about the second half, because we still want to be ready for the upcoming potential risk like the trade wars between the US and China. Like -- also like Ricky mentioned, that we changed the guidance from total throughput to equity throughput, which is more relevant to our net profit.

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Maggie Shun, Harris Investment Management - Analyst [19]

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I understand. But is that the high single-digit include the new ports you included from this year or late last year? Or is it purely based on like-for-like growth?

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [20]

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It is including the new ports as well.

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Maggie Shun, Harris Investment Management - Analyst [21]

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Okay, sure.

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [22]

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For the second question, Maggie, for the CapEx, for our full-year budget the CapEx is $1.7 billion, in which half is related to [PDMV] for our assisted terminals and the rest of the CapEx is for our potential investment. And for the first half of this year we will spend around USD117 million, which is mainly related to our existing terminals PDMV.

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Maggie Shun, Harris Investment Management - Analyst [23]

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So, do you think you will hit your budgets by the end of the year?

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [24]

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Actually there are a lot of factors we need to -- before we have a clearer clue. We are having -- some of the major deals are ongoing right now. We cannot predict the final results at this point. So, it's really hard for us to answer right now it will meet the number.

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Maggie Shun, Harris Investment Management - Analyst [25]

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Okay. So, may I say you either spend it by the end of this year or you'll probably postpone those to the next year?

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [26]

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Actually we make our budget based on every year's forecast. So, we -- generally we don't postpone anything to the next year.

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Maggie Shun, Harris Investment Management - Analyst [27]

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Okay.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [28]

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So, regarding to your questions about the sales and cost of sales breakdown, we have the top 10 terminals -- top 10 terminals contributed on the slide 5 so that you can see the proportions of the terminal profits for the top 10 terminals.

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Maggie Shun, Harris Investment Management - Analyst [29]

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I think that's for the end profits. My question is really I want to see what is the actual revenue for the existing ports? And what is the actual cost for the existing ports so I can understand what is the actual profitability or gross profit margin for the existing ports? If you could provide that that would be great.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [30]

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Okay. Let's get back to you afterwards, okay?

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Maggie Shun, Harris Investment Management - Analyst [31]

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Sure, thank you.

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Operator [32]

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Robin Xu, UBS.

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Robin Xu, UBS - Analyst [33]

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I have a few questions actually. The first one starts with the proposed acquisition of stake in the CCCC Dredging. So, I can understand the long-term synergy, but how would you reconcile with the short-term ROE dilution? I mean, the acquisition price is obviously going to be at least one times book and the asset on 2018 numbers generate no more than 5% ROE.

I cover the CCCC, so I understand the numbers of the CCCC Dredging. And at least in the near-term I think the risks for that business is very strict environmental controls over land reclamation, which we are not going to see, I think, improvement in the coming years. So, I guess probably ROE will stay at this level.

And obviously I think for our company we are looking for improvement of ROE from 6% to 7%. And this dilution might hurt near-term ROE. And how would you take that into consideration with the five-year target? This is my first question.

The second question is a follow-up question on this Beibu Gulf. Obviously you booked more profits in first half versus Q1, which means that there is going to be fair value gain in Q2. But if you look at Q2 alone, I think share price of this Beibu Gulf was actually down. So, is it because of some ForEx-related issues, or is it because of you've also received dividend income from Beibu Gulf in Q2?

The third question is on Tianjin Port restructuring. Is there going to be any like whether being disposal or fair value gain from this restructuring? And also, why is this [Eurasia] not included in this restructuring?

And probably last question -- on this IFRS 16, you mentioned about $20 million impact for full-year and the first half was only $6 million. So, why is it more in the first half versus second half, probably $14 million? Thank you.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [34]

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Let me answer your first questions. Okay, so we have posed announcement last Friday and we haven't published the circular yet. So, we thought that we could discuss more after the circular to be distributed or to be posted. And (inaudible) speaking, we have to understand that different industries will have different types of earnings quality -- growth potential and earnings quality as well. So, we cannot just directly to compare to our existing port business.

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [35]

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Let me add some more comments about this question. Dredging business is highly related to port construction which has a lot of connect -- I think we are in the position to say that we understand this business more than outsiders -- more. For our understanding, that this dredging business in China is highly influenced by the government's policy. Because of that they suffered a major slowdown in 2018 because of the higher restriction now from the government side.

But from our understanding of this business, we have strong confidence that either from China or outside or in overseas market, this dredging business could see some major picking up in the near-term and in the long run as well.

In the near-term the China government may lose the restriction of this business. And in the long run the synergy between our Company and the CCCC will help them to enlarge their position in the global market. So, we are confident that we will create and host a lot of synergies on this dredging business.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [36]

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So, in the announcement you can see the 2017 numbers and 2018 numbers as well. And okay, so based on the CCCC website and in the 2018 results briefing they have some more explanations why the 2018 earnings were slower than 2017. So, you can actually refer to it. And after we publish the secular then we could have more detailed explanations.

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Robin Xu, UBS - Analyst [37]

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Okay, sure. Thanks.

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [38]

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Yes. Another is related to the Beibu Gulf Port. You can see there will be a change for the second -- first quarter is mainly due to the inflation of the renminbi. So, there is a translation, mainly the difference of the fair value and the change of the renminbi.

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [39]

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And regarding Beibu Gulf Port, you probably have already read from the news that Guangxi Province has just recently announced that new free-trade zone of China. So, because of those policy changes and (inaudible) we have quite strong confidence that the Beibu Gulf Port will enjoy some benefits from this new state-level policy. So, although there is some up and down of this -- of the stock price of this stock, but generally it is stronger than the market average right now.

For the Tianjin reconstruction, you asked about Eurasia terminals didn't -- was not included in the first round. But I think -- as far as I know, it will gradually be included, but --. You probably need to reconfirm with the relevant party, but we have the expectation that Tianjin Port Group has a long-term target that they want to include more facilities into this reconstruction, but nothing has been confirmed yet.

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Robin Xu, UBS - Analyst [40]

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The second piece, (multiple speakers) fair value gain. Is there going to be fair value gain from this Tianjin Port restructuring in Q3?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [41]

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Actually, as we think [reorganized], restructuring is not yet complete. So, at this moment I don't have any exact figures of the -- any (inaudible) in that at this moment.

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Robin Xu, UBS - Analyst [42]

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Okay, all right.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [43]

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So, the fourth question is about the accounting -- the new accounting standard, right?

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Robin Xu, UBS - Analyst [44]

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Yes.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [45]

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Would you mind repeating your question again, your fourth question?

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Robin Xu, UBS - Analyst [46]

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It's a very simple question. I think you mentioned about the estimate for the full year is going to be $20 million impact but first half was only $6 million. So, is it because of a lag or is it because of -- was $40 million in the second half a normalized number?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [47]

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In the second half of the year we'll expect that some of the lease will be -- new lease will be signed for those companies. And we will have a bigger figure impact to our IFRS 16. But at this moment actually this is just our budget.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [48]

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Yes, and we mentioned that it's normal -- that amount is no more than USD20 million -- (inaudible).

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Robin Xu, UBS - Analyst [49]

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I think my quick question is let's assume that if it's $20 million for this year, does that mean it's going to be like $28 million for next year? Or is it still going to be $20 million?

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [50]

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Oh, you mean the trend, right?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [51]

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I think it's reasonable to [tell it] to you at this moment, because the trend depends on any new lease will be signed in the coming few months. Yes.

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Robin Xu, UBS - Analyst [52]

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So, it should at least be higher than $20 million?

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [53]

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But we think it won't be a very significant change increase in the coming two years.

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Robin Xu, UBS - Analyst [54]

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Okay. All right, thank you.

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Operator [55]

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(Operator Instructions). Kelvin Lau, Daiwa.

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Kelvin Lau, Daiwa - Analyst [56]

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I've got a few. First of all, you have run the Navis N4 system in some of the ports. Can you share with us, after running the system, will you see a very significant cost control or cost reduction per TEU in these ports? This is the first question.

The second question is that I saw actually the OOCL contribution probably maintained around similar percentage as before. So, is it that because this shipping (inaudible), you already acquired it? So, is it that it will maintain around 3%-point-something and it won't go any -- much further upside? These are my two questions.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [57]

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Okay, let me answer your first question about the Navis N4. We start to launch the Navis N4 system in Zeebrugge Terminal since July. So, up to now we only have about around two months' time. So, basically we finished the integrated process and up to now we see that the operations are running smooth. And something we believe that Navis N4 could provide the upside potential for the efficiency and also having us to control the cost. So, in the second half we are going to launch Navis N4 in [Niangong] Terminal as well.

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [58]

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I want to add one more comment on this. N4 System, any major system, IT system transition -- the first crucial goal is to maintain a smooth transition. So, I think we are quite successful about this for the past two months. Navis N4, which is the newly implemented system, has successfully taken over the operation. I think the result is very satisfactory.

I think Navis N4, they can show their potential in bringing down the cost, especially in those terminals that have very high utilizations like Lianyungang or Xiamin. Like you maybe already know that Zeebrugge, for the time being, is still a terminal that running under below average utilization. That's one of the reasons why we take Zeebrugge as the first one to make the transition because you can lower risk and that is clearly see what's going to happen.

So, we will closely monitor what's going to be with N4 and now Zeebrugge. And to have a clearer look about what's going to happen now about the new system, we probably need to wait for the implementation with Lianyungang. That is a quite [old] terminal. Second question -- would you repeat your second question about OOCL (multiple speakers)?

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Kelvin Lau, Daiwa - Analyst [59]

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The OOCL contribution, would it go further up or would it be staying more or less around this percentage?

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [60]

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Actually in the first half of this year, the contribution from OOCL up to about 17% -- nearly 17%. That's a quite high number. But because their original number was very low, so I think that the potential is very big.

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Kelvin Lau, Daiwa - Analyst [61]

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Okay, thank you.

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Operator [62]

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(Operator Instructions). Kelvin Wong, JPMorgan.

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Kelvin Wong, JPMorgan - Analyst [63]

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I just had a quick question on port acquisitions and our thinking around that or our strategy. Can we get a little bit more color around specific geographical regions we are looking at, given we are seeing some broader macro pressures right now? Is this -- are we viewing this as an opportunity to maybe be a bit more active in our negotiations? What are we seeing on valuations?

I just want to put this in context with what you mentioned earlier, which is the reality of broadly -- things are going a bit slower, but at the same time potentially this could open up more opportunities for investment. Thank you.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [64]

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I think personally speaking, I think one of the potential effects of the current trade war might be that some of the good Chinese companies will become global companies faster than we are expecting. We are pushing -- we were pushed to go that way. As you know that globalization is one of the major strategies of COSCO SHIPPING Ports. Because of the current trade conflicts we may need to move even faster.

And you probably already know that our network is not in the same level as our fleet yet. Currently our fleets, they are global -- I mean container fleet -- their global market share is around 12% or 13%. But our COSCO SHIPPING Ports units only account, I think, 5-point-something global market share.

So, we have a very big potential to grow. And you can see that COSCO SHIPPING Ports, the major contribution -- volume contribution right now is still China. You can see more that -- you can [spend] more -- that we need to make more active globalization as well. So, I think we will definitely actively implement our globalization strategy.

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Kelvin Wong, JPMorgan - Analyst [65]

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Okay. Understood. Thank you.

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [66]

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You asked about what part of the world we have more interest. I think there are a lot of areas there we are interested. But among all those regions, I think Southeast Asia or Africa are on the top list.

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Kelvin Wong, JPMorgan - Analyst [67]

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Okay, great. Thank you.

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Operator [68]

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Kelvin Lau, Daiwa.

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Kelvin Lau, Daiwa - Analyst [69]

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Just a follow-up. Your guidance of high single-digit equity throughput growth, does it include your expected M&A or it's just organic?

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [70]

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This guidance did not include the M&A potentials.

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Kelvin Lau, Daiwa - Analyst [71]

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Thank you.

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Operator [72]

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(Operator Instructions). There are no questions at the moment. I will hand it back over to management for any closing remarks.

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Ricky Ng, COSCO SHIPPING Ports Limited - GM of IR [73]

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Thank you very much. Here comes the end of today's briefing. Thank you very much for joining us today. If you have any further questions, please feel free to contact us at any time. Thank you very much.

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Zhang Wei, COSCO SHIPPING Ports Limited - Chairman & Managing Director [74]

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Thank you.

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Margaret Su, COSCO SHIPPING Ports Limited - Executive Deputy GM of Finance [75]

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Thank you.

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Operator [76]

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This concludes our conference call. Thank you all for attending.