CTL has occupancy rights for two areas of land
The Citylong site of approximately 5.8 hectares and the Nantian (NTN) site of approximately 7.3 hectares.
The Citylong site is eligible for re-zoning from Industrial to Commercial.
The company has a long-term (3 to 4 years) plan to apply for the rezoning.
The NTN site is the larger of the two sites and is already zoned for industrial use.
In terms of logistics it will be more convenient having the processes conducted by both Citylong and NTN on the same site, which is also near a planned wharf and logistics centre.
If the Citylong site is rezoned as commercial, the plan is to approach developers to undertake a joint venture project on the site.
CTL will provide the land, which will be independently valued. The developer will supply funding for the building project with shares to be agreed based on relative financial contributions. It is anticipated that once this exercise is completed there will be a significant increase in the value of the property and this in turn will positively impact the balance sheet of the business.
The NTN site also has significant potential for an uplift in value
The company has permission to apply for a redevelopment permit, to allow for land reclamation and the building of a wharf capable of handling ships to the size of 10,000 DWT (currently 5,000 DWT).
Apart from centralising the Citylong operations at this site, there would also be a warehousing and logistics centre.
The cost of achieving the development permit is projected to be around 20M RMB and on the basis of the maximum subscription being reached it will be undertaken with proceeds of the IPO raising.
The company has a valuation report that shows the value of the land increasing to around 300M RMB, once the development permit has been granted.
The actual development of the site will take approximately 1 to 2 years and would require capital expenditures approaching AU$20 million.
The management of CTL believes the reasoning behind these plans is sound.
China’s automobile logistics market grew from RMB94.5billion (2010) to RMB149.5billion (2015), a compound rate 9.7%.
The location of the land is ideal being both within a defined ETDZ and within the catchment of 39% of all automotive component suppliers in China.
Further, the region is part of the Chinese government’s “One Belt One Road” strategy that concentrates an economic focus within the area.
Other government support in developing logistics facilities includes taxation relief along with increased spending on infrastructure development, policies to support logistics information, data analytics and service quality