Overall business environment
The strong and well established industrial base of Wuhan featuring operators in major industries, including automobile and its components, chemical, steel, textile, machinery and equipment as well as those in the construction materials businesses have been and will continue to be the principal providers of gateway cargoes to the WIT Port.
Due to the inherent water-depth limitations along the upstream regions of the Yangtze River, it precludes bigger ships from navigating directly between those areas and Shanghai. The trans-shipment service provided by the WIT Port offers a more economical alternative to ship container cargoes using bigger ships carrying more containers to and from Shanghai and overseas. Surrounding areas which are serviced by the WIT Port include Hunan, Guizhou, Chongqing, Sichuan, Shanxi, Henan, Hubei and Shaanxi Provinces. Strategic initiatives by the government for shipping companies and the WIT Port promotes direct shipment to the Yangshan Port in Shanghai （江海直達） have further strengthened the position of the WIT Port as a trans-shipment port at the mid-stream of the Yangtze River.
The Group has also developed port related services including agency and integrated logistics service businesses to expand its revenue sources, including bonded warehousing, customs clearance, break bulk and distribution at the WIT Port.
The Multi-Purpose Port, which is located adjacent to the WIT Port, extends the container handling capacity of the Group to beyond that of the WIT Port and supplements the terminal service business operation of the Group alongside the WIT Port.
In the second quarter of 2016, the Group successfully completed the acquisition of Zall Infrastructure Group Company Limited and its subsidiaries (the “Hannan Group”), a group which owns, amongst others the Hannan Port, for a consideration which was settled by way of allotment and issue of 408,010,509 new shares of the Company. The Hannan Port is located along the Yangtze River in Wuhan, adjacent to the Shanghai-Chengdu, Beijing Zhuhai Expressway and within 80 kilometers from the Beijing-Guangzhou Beijing-Kowloon rail link and is the principal contributor of port and warehouse leasing income to the new property business segment of the Group. The Group plans to develop the Hannan Port into a multi-purpose service platform in phases, providing terminal, warehousing and logistics services and such other services including RORO (Roll on Roll off), terminal, bulk cargo transportation and storage, automobile spare parts processing and logistics.
In the second quarter of 2016, the Group successfully acquired 60% equity interest in Shayang County Guoli Transportation Investment Co., Limited* ( 沙洋縣國利交通投資有限公司, “Shayang Guoli”) for a consideration of RMB47,148,000. Shayang Guoli is principally engaged in (i) the investment, construction, development and management of transportation infrastructure; (ii) management and operation of the transportation-related advertising business; and (iii) land-related development through land reserve development centres; and owns the integrated port construction project in Phase 1 of the central port area in the Shayang Port.
The Shayang Port is one of the major port construction projects under the “12th Five-Year Plan” of Hubei Province of the PRC, which will serve as a water transportation hub connecting surrounding six provinces, an essential material distribution centre of Central Wuhan and also a superior port area for the middle reaches of the Han River. The investment was made as part of the Group’s strategy to establish a synergistic connection between the Shayang Port and the WIT Port in the Yangtze River Basin. This serves to maximise the WIT Port’s advantage as a logistics centre of the Yangtze River, which is in line with the development trend of “One Belt, One Road” policy in the PRC, and is beneficial to the Group implementing its strategic aims in the Yangtze River Basin.
In December 2016, the Group acquired 60% equity interest in Zhongxiang City Port Development Co., Limited* ( 鐘祥市中基港口發展有限公司, “Zhongxiang City Port Co.”) for a consideration of RMB52,810,000. Zhongxiang City Port Co. is principally engaged in (i) the investment, development and management of transportation infrastructure, (ii) loading and unloading of cargoes, and (iii) shipping agency services. Zhongxiang City Port Co. is also involved in the development project of a port, logistics and industrial mixed-use port district with an area of approximately 25 square kilometers located in Shipai County, Zhongxiang City, Jingmen, Central Hubei (the “Shipai Port”). The port portion of Shipai Port is to occupy an area of approximately 2.5 square kilometers with the planned construction of four (4) 1000-tonne class berths together with a logistical park covering approximately 2.5 square kilometers to be constructed next to the port area.
In January 2017, the Group acquired Zhongji Tongshang Municipal Construction Engineering (Wuhan) Co., Ltd.* ( 中基通商市政工程（武漢）有限公司 (formerly known as Hubei Haiwote Municipal Construction Engineering Co. Limited*, 湖北海沃特市政工程有限公司), (“Zhongji Tongshang Construction”) for a total consideration of RMB43,600,000. Zhongji Tongshang Construction is principally engaged in undertaking municipal construction projects. The acquisition of Zhongji Tongshang Construction will act as the platform for the Group to diversify its business and explore new business opportunities in the construction industries.