China State Construction International Holdings

CSCI inks HK$63b of likely tenders

PUBLISHED : Thursday, 22 September, 2011, 12:00am
UPDATED : Thursday, 22 September, 2011, 12:00am

China State Construction International Holdings (CSCI) has signed agreements with two companies involving billions of dollars of potential tenders for mainland contracts.

CSCI, one of Hong Kong's largest contractors, entered the mainland market in 2008 and started investing in infrastructure projects in 2009.

CSCI will invite China State Construction Engineering (CSCEC), a Shanghai-listed state-owned enterprise that is China's largest building contractor, to bid to work on mainland projects of CSCI's worth HK$43 billion between now and 2014.

'CSCEC has substantial experience in construction,' said CSCI's announcement. 'The agreement provides CSCI the option to engage CSCEC as contractors for CSCI's construction works. [This will] benefit CSCI by leveraging the substantial experience of CSCEC.'

The invitation includes HK$13 billion of contracts that CSCI may ask CSCEC to bid for in November and December, given that CSCI has won several mainland projects recently.

Meanwhile, China Overseas Holdings, which CSCI span off from in 2005, and which is a subsidiary of CSCEC, will invite CSCI to tender for housing and infrastructure projects worth 20 billion yuan (HK$2.44 billion) between now and 2014.

Separately, the agreement between CSCI and China Overseas 'will provide CSCI with a means to invest in housing and infrastructure businesses and enhance CSCI's rapid business development in China'.

CSCI had already won HK$25.7 billion worth of contracts this year, 49 per cent more year on year, according to a Citi report. 'The growth drivers are from build-transfer projects and build-operate-transfer projects in China, Hong Kong and Macau,' the report said. 'The outlook across these regions remains healthy despite the worsening macroeconomics in the United States and EU.'

As of September 9, CSCI's order backlog had soared 53 per cent year on year to HK$51 billion, which will be booked as revenue over the next three years, Citi said. CSCI's HK$51 billion of backlog orders includes $18.5 billion of budget housing.

Citi said CSCI believed its profit margins would improve in the second half as it undertook more affordable housing construction projects on the mainland and infrastructure financing projects.

A JPMorgan report said: 'The guidelines related to affordable housing loans issued recently by PBOC [People's Bank of China] are likely to accelerate the growth in new affordable housing projects in China.'