Replies to post #51 on Guanshen Railway (GSH)

[Investorman]

Zacks.com
GSH's Current Price is Fair
Monday February 4, 2:02 pm ET
By Paul Cheung, CFA

Guangshen Railway Company Limited (NYSE: GSH - News) announced strong growth of revenue for the first three quarters of 2007 due to acquisition of the railway transportation assets of the Guangping Line. The company is well-positioned to leverage the railway growth opportunity in China especially in Guangdong province. However, the government's price regulation for railway transportation would negatively affect the company's earnings when its costs increase. Overall, we think its current price fairly reflects its prospects.

On October 25, Guangshen Railway announced the unaudited operating results of the company for the nine months ended September 30, 2007. During the Period, under the China Accounting Standards for Business Enterprises, the company realized a consolidated revenue from operation of RMB7,442 million and a net profit of RMB1,136 million. Earnings per share were RMB0.16 ($1.06 per ADS).

The railway tariff is regulated by Chinese government. This would negatively affect the company's earnings when its costs increase. Second, with respect to passenger transportation, the company faces competition from bus services. Bus fares are lower than the fares for its high-speed passenger train services. Furthermore, buses can offer added convenience to passengers by departing from or arriving at locations outside their central terminals, such as hotels. Third, with respect to freight transportation, the company faces increasing competition from truck transportation in the medium- and short-distance freight transportation market as the expressway and highway networks in our service region and neighboring areas have increasingly improved.

Based on our estimate for fiscal year 2008 earnings per ADR, the stock is trading at 18.3x, which is higher than the industry average. Using a P/E multiple of 19.3x our fiscal year 2008 earnings per ADR estimate yields a target price of $34.75, which we believe reflects the company's prospects. Thus, we are maintaining Hold rating on the stock.

[Investorman]

Guangshen Railway Announces 2007 Annual Results
Wednesday April 23, 8:25 am ET

Net Profit Surges 85.5% to RMB1,431 Million

-- Total revenues amounted to RMB10,509 million, an increase of 192.4% as compared to 2006
-- Profit from operation amounted to RMB1,765 million, an increase of 82.9%
-- Profit attributable to equity holders amounted to RMB1,431 million, an increase of 85.5%.


HONG KONG, April 23 /Xinhua-PRNewswire-FirstCall/ -- Guangshen Railway Company Limited ("Guangshen Railway" or the "Company") (HKEx: 525; SSE: 601333; ADS: GSH) today announced the audited operating results of the Company and its subsidiaries (the "Group") for the year ended December 31, 2007 (the "Year").

For the year of 2007, total revenues of the Group amounted to RMB10,509 million, representing an increase of 192.4% as compared to 2006. Profit from operation amounted to RMB1,765 million, an increase of approximately 82.9% year-on-year. Profit attributable to equity holders amounted to RMB1,431 million, an increase of 85.5% year-on-year. The board of directors of the Company recommended the payment of a final dividend of RMB0.08 per share for the year 2007 (2006: RMB0.08 per share).

Mr. He Yuhua, Chairman of the Company, said, "The Company made several crucial breakthroughs in 2007. With the sixth-round implementation of the railway speed-up project and a large-scale operation of the Company's domestically manufactured high-speed electric train sets ("CRH"), the overall efficiency and travel comfort of the Company's trains improved substantially in 2007. In addition, the completion and opening of the fourth rail line between Guangzhou and Shenzhen, as well as the Company's successful acquisition of Guangzhou -- Pingshi Railway's operating assets during the Year have substantially expanded the Company's asset size and transportation capacity. Such favorable factors contributed to the significant growth in the Company's overall operating results."

Passenger transportation business is the most important business of the Company. In 2007, the passenger delivery volume of the Company was 73.053 million, representing an increase of 103.1% as compared to 2006. Of such amount, the passenger delivery volumes of Guangzhou-Shenzhen trains, Hong Kong Through Trains and long-distance trains were 24.725 million, 3.192 million and 45.137 million respectively, representing an increase of 11.2%, a slight decrease of 0.5% and an increase of 328.8% respectively as compared to 2006. Revenues from passenger transportation amounted to RMB5.83 billion, an increase of 123.6%.

The remarkable increases in the Company's revenues and volumes of passenger transportation were not only attributable to the sixth round implementation of the railway speed-up project, as well as the large-scale operation of high-speed electric train sets, CRH, which improved the efficiency and comfort of the trains. In addition, the fact that the Xintang- Shigu section of southbound Guangzhou-Shenzhen expressway nearby has been entirely closed for renovation starting from October, 2007 has diverted part of bus passengers to train transportation, which led to a surge in passenger delivery volume on Guangzhou-Shenzhen trains. Also, the incorporation of the long-distance transportation businesses of Guangzhou-Pingshi Railway subsequent to the Company's acquisition of the railway transportation assets thereof at the beginning of the year, has resulted in significant increases of the delivery volume and revenue of long-distance trains of the Company. The passenger delivery volume of Hong Kong Through Trains decreased slightly, mainly due to the construction of the Fourth Rail Line during the beginning of the previous year, and also the diversion of Through Train passengers caused by the improvement of the operating efficiency and service quality of Guangzhou-Shenzhen trains.

During the Year, total tonnage of freight transported by the Company amounted to 71.010 million tonnes, representing a significant increase of 131.2%; revenues from freight transportation were RMB1.33 billion, an increase of 134.5%. The remarkable increases in freight volume and revenues were due to the incorporation of the freight transportation business of Guangzhou- Pingshi Railway, following the completion of the Company's acquisition of Guangzhou-Pingshi Railway.

Regarding the Company's development in 2008, Mr. He said, "While the Company's passenger volume, freight volume and revenues reported impressive growth after the acquisition of Guangzhou-Pingshi Railway, the Company will continue to press ahead and enhance its business. Apart from a continuous optimization and consolidation of the railway operating assets of Guangzhou- Shenzhen Railway and Guangzhou-Pingshi Railway, and an optimization of the "As-frequent-as-bus" operation of Guangzhou-Shenzhen intercity trains, the Company will operate more local trains according to market trends, as well as expanding long-distance passenger trains service. As for the freight business, the Company will continue to promote the marketing of this business segment, improving the deployment and organization of freight trains and operating more freight through trains, in order to elevate the Company's business to a higher level."

Guangshen Railway Company Limited was established in 1996. The H shares and ADS issued by the Company were listed on the Stock Exchange of Hong Kong Limited and the New York Stock Exchange respectively in May 1996. The Company is currently the only PRC railway enterprise with its shares listed overseas. In December 2006, the Company returned to the A share market and successfully listed its shares on the Shanghai Stock Exchange. The Company holds the sole operating rights of Guangshen Railway, one of the most modern railways in the PRC. The Company is mainly engaged in railway passenger and freight transportation businesses between Shenzhen, Guangzhou and Pingshi, long- distance passenger transportation services, as well as the Hong Kong Through Train passenger service in cooperation with MTR Corporation Limited ("MTR") of Hong Kong. As at December 31, 2007, the Company operated 195 pairs of passenger trains, including 80 pairs of passenger trains between Guangzhou and Shenzhen, 102 pairs of long-distance passenger trains and 13 pairs of Through Trains.

[Investorman]

The silk railroad

Nothing should get investors more excited than when the shares of an attractive company take a tumble. Last October, for example, Guangshen Railway was highlighted as one of CAPS' top-rated Asian stocks, but as my Foolish colleague Todd Wenning noted at the time, the company's valuation seemed steep.

Well, after eight months and a nearly 50% price decline, Fools finally have the chance to jump aboard Guangshen at more reasonable, possibly even bargain, levels.

As Todd mentioned, Guangshen's price-to-earnings (P/E) ratio was nearly double that of its U.S. counterparts Burlington Northern (NYSE: BNI) and Union Pacific (NYSE: UNP). But thanks to the well-documented strength in U.S. railroad stocks, and Guangshen's weakness ever since, all three companies currently trade at roughly the same P/E. And of course, our CAPS members are just as fond of Guangshen's financials, competitive advantages, and growth opportunities today as they have been in the past.

For those unfamiliar to the Guangshen story, it is the sole railroad company operating between Guangzhou and Shenzhen in China's Pearl River Delta (a.k.a. the busiest route in the country). That description alone should at least have you thinking about the intriguing bounce-back possibilities, so here's a pair of bullish CAPS comments to help you aboard.

CAPS player NetscribeServcs likes the big picture:

The demand for railway transportation is expected to remain strong with the robust economic growth in China. The growth in rail transportation is much below the economy growth. The Chinese Government is investing approximately $12.8 billion by 2020 to expand the railway network by 35%. Tracks are being built, but at a slower pace and China is witnessing a rise in demand for rail transportation.

CAPS All-Star kamp2 touches on Guangshen's seemingly limitless growth potential:

Miles and miles of space. Millions upon millions of people. Tons upon tons of freight to transport. New frontiers wherever they need to go. Railways will get them there first and it's going to happen fast. GSH will be the road to ride in CHINA.