TransInfo CFO Troy Mao
CHINA TRANSINFO Tech Corp (Nasdaq: CTFO) has had quite a run of late.
The leading Chinese provider of public transportation systems technology saw its 2009 revenue shoot up 116.8% to 63.7 mln usd, and the firm anticipates solid top line growth momentum again this year.
And to highlight a great start to 2010, the Beijing-based firm was awarded a 156 mln yuan transportation system contract in the eastern Chinese province of Zhejiang, and was also ranked among the top mid-cap Chinese companies by Forbes China.
Chna TransInfo expects revenue this year to jump to 120 mln usd, and for key business units, the Nasdaq-listed firm enjoys 50% gross margins.
In a recent exclusive interview with NextInsight.net, company CFO Mr. Troy Mao said that being based in and focused on China, the world’s largest car market by sales as of this year, TransInfo was committed to hitching its wagon to the transportation boom in the country.
What’s Good for TransInfo is Good for China
TransInfo is Watching: Its Passenger Flow Detection Systems help train and bus stations operate smoothly. Photo: company
With China’s spectacular growth in private vehicle ownership and the rapid expansion of road and rail networks across the country, Beijing sees the mighty automobile and all the auxiliary sectors as a collective pillar industry.
So does Mr. Mao.
“We enjoyed very solid organic growth last year thank to a booming market in China. And as we are currently the largest transportation IT provider in China with a 5% domestic market share, we still have huge growth potential,” he said.
He said that 2009 results even surprised on the upside, such was the strength and resiliency of the revved up Chinese automobile market.
“We are very happy with our results for last year. We are focused on IT for the transportation sector, which is a booming industry. Add to that that the sector enjoys strong central and provincial government promotion especially in the areas of infrastructure so our business directly benefits from the huge government focus.”
Last year China led the world in vehicle output with nearly 14 mln units, and this is the core factor driving business for China TransInfo.
“This explosive growth is also boosting our gross margins, which remain very strong. In fact, for some of our business units they are at 50%.
However, overall group margins were less spectacular but this was a short term phenomenon as the company expanded across the country.
| |
ChinaTransInfo
(Nasdaq: CTFO) |
2009 |
Yr-on-yr
% change |
| Revenue (usd) |
63.7 mln |
116.8% |
| Gross profit |
25.4 mln |
53.8% |
| Operating income |
13.7 mln |
20.0% |
| Net profit |
13.6 mln |
19.7% |
| EPS |
0.60 |
0.54 (2008) |
|
| |
|
"Our gross margins on a consolidated basis were lower due to legacy costs. New acquisitions will naturally lead to temporary margin decreases but will pay off over time. We fully expect to build synergy from our new acquisitions,” Mr. Mao said.
China TransInfo enjoyed a “very good market presence” on the country’s highways, and this is where the real revenue drivers were located, he added.
“For example, we are able to promote our high end products to new and improved highways in Shanxi province (in northern China). We also set up the first high end data center in China which will only get stronger in the future. This will of course boost our margins over time and bring other benefits.
“Vehicle numbers in China are growing very fast, so this naturally helps our business. Plus, there is alot of demand from the government on the transportation side so we are very optimistic.”
The ongoing 4.5 trln yuan central government stimulus package meant to maintain growth amid the global slowdown was also paying dividends to companies like China TransInfo, as the government was very keen on keeping construction, infrastructure and mass-employing industries like the auto sector humming along to maintain social stability and high GDP growth figures.
“We are definitely benefitting from the stimulus package,” Mr. Mao said.
“Some 1.5 trln yuan of the total has been allocated by the government for transportation infrastructure including highways, railways and airports, so we stand to benefit tremendously.”
| |
| ChinaTransInfo Tech |
Metrics |
| Market cap (usd) |
145.3 mln |
| April 5 closing |
6.47 |
| 52-wk high |
17.29 |
| 52-wk low |
2.38 |
| P/E |
12.2 |
|
| |
|
He added that the central government was intent on the Smart Grid concept, whether for its massive energy nexus or its equally expansive matrix of highways and rail lines crisscrossing the most planet’s most populous country.
“Beijing has also said that its transportation and communication sector would see some 5 trln yuan in investment over the next 3-5 years, a massive input which began in late-2008. The majority of the money will be used to enhance the country’s transportation network, and as we are an IT service provider directly targeting this sector, we are very confident in our future growth.
“And we are definitely benefiting from the government’s promotion of the domestic market. And as this industry requires new and high-tech standards, there is a very high entry barrier. So it’s quite hard for newcomers to become our competitors.”
Mr. Mao said China TransInfo will continue to focus on organic growth, but will not shy away from picking up new firms if the price and fit are right.
“We will look for value added acquisitions but we will also be very picky.”
Though based in Beijing, this did not mean China TransInfo did not have a national strategic focus.
Crowded Market: TransInfo's technology will help alleviate traffic jams in Shenzhen like this.
Photo: Andrew Vanburen
The firm launched three new real-time traffic mobile phone applications and expanded real-time traffic application coverage to Shenzhen, Tianjin and Changzhou --- all within the fourth quarter of 2009!
Beijing is somewhat worried about the explosive growth in auto ownership and its impact on both traffic congestion and air quality, and this concern manifests itself in higher highway tolls and expanding rail and air networks.
“Higher tolls are no big deal as if people are in a position to buy cars, then they are not going to shy away from paying more at the booth. It is a luxury status symbol and also at the end of the day China is also interested in supporting IT infrastructure to boost economy so we are in a good place.”
He said competition from rails and air travel was not a major concern for the company.
“Cars, once owned, are hard to give up and leave idly parked. That being said, we also benefit from the growth of public transportation thanks to our Intelligent Bus Traffic Systems and Passenger Flow Detection Systems.
“We expect a good strong year this year.”
On February 24, China TransInfo issued and sold 1.6 mln shares of its common stock at a price of 6.39 usd per share to SAIF Partners III L.P. for an aggregate purchase price of 10 mln usd.
Mr. Mao said the company had no new fundraising activities to announce at this point, but was on the lookout for additional listing opportunities.
“We would like to list in Hong Kong or issue A shares but the latter have restrictions for listing. We definitely would like to list in more capital markets.”
Related story: CHINA AUTO: Domestic consumption sparking sector
