China's Economic Development Steady, Expressway Industry Bullish

Shenzhen Expressway 3Q2016 Results Meet Expectations, A Share Incentive Scheme Poised for Breakthrough

HONG KONG, Nov 13, 2016 - (ACN Newswire) - China's economy expanded at a steady 6.7% in the third quarter and looks set to meet Beijing's full-year target. The National Bureau of Statistics announced last week that China's Consumer Price Index, a general gauge of inflation, rose 2.1% last month YoY, compared with a 1.9% gain in September. The Producer Price Index, a factory-gate measure of inflation, rose 1.2% from a year ago, turning toward an inflationary trend since September. Ultimately economists saw that industrial demand was rising while import commodity prices were also rebounding, resulting in a steady increase in economic vitality.

Accelerating Economic Stability and Freight Volume Growth Directly Benefit the Expressway Industry

According to the Ministry of Communications, freight volumes on China's roads rose 4.9% during the period January to September 2016, with express delivery volume achieving a YoY increase of more than 50%. Analysts forecast that the positive trends in society-wide freight volume and sub-division circulation field data largely reflect the China's economy entering a more stable phase. If this situation remains until the end of the year, expressway traffic flow will maintain a course for growth.

The data show that during the National Day 'Golden Week' holiday this year, traffic volume on mainland China's toll roads reached more than 280 million units, a YOY increase of 7.8%. The Beijing-Tianjin-Hebei region, Yangtze River Delta, Pearl River Delta and Chengdu-Chongqing region routes all recorded significant traffic congestion during this period. The number of people who choose to drive on holiday tours has also been increasing over the past several years, which will, in turn, boost development of the expressway industry and directly benefit Shenzhen Expressway Company Limited ("Shenzhen Expressway" or the "Company"; Stock Code:0548.HK).

The 3Q2016 Results of SZE Maintained a Stable IncreaseThe Third Quarterly Report ("Report") of Shenzhen Expressway indicates that net profits attributed to owners of the Group hit RMB332 million, a YOY increase of 5.7% in line with estimates. From the period January to September 2016, the Group recorded net profits of RMB947 million, a YOY increase of 11%. Toll charges were the main source of the Group's revenue. From January to September 2016, the Group recorded toll revenues of RMB2.744 billion, a YOY increase of 25.4%. Following the February 2016 implementation of the 'Three Projects' toll adjustment proposals traffic volume along toll-free road sections had increased, thus driving the growth of traffic volume on the connected Jihe Expressway and Shuiguan Expressway. The first three quarters' outstanding results have laid a solid foundation for Shenzhen Expressway Company to meet its full-year targets.

The Ongoing Promotion of The Restricted A Share Incentive Scheme is Accelerating Business Growth and Long-term Development Benefits

The Restricted A Share Incentive Scheme (the "Scheme") was passed by the Company Board at the end of September 2016, and was submitted at a general meeting to reconsider several of the Scheme's resolutions on 23rd November 2016. The Company is confident that implementation of the Scheme will further establish and improve the Company's long-term corporate incentive systems, attract and retain top talent, and actively motivate the Company's senior management and key technicians. All of these factors will effectively tie together the interests of shareholders, the Company and its management, enabling all relevant parties to become more aware of the Company's long-term developmental potential, and more effectively realise the Company's development strategies. The Incentive Scheme has adopted restricted shares as a motivational tool. The source of the underlying granted shares will be ordinary A shares issued to participants by the Company.

The market widely expects that promoting the Restricted A Share Incentive Scheme will obviously bolster staff motivation and accelerate the process of diversifying the Company's development. CICC, CMS, ESSENCE International and other mainstream securities companies feel that because this Scheme focuses more on participant's interests rather than avoiding them as was the case previously, the chances are greater that it will be approved at the general meeting. According to research by ESSENCE International, share incentive schemes induce management personnel to take a more active role in contributing to a company, and once you fulfill the conditions of the restricted shares, this will bring a steady stream of successful rewards.

Despite all this, there are certain uncertainties surrounding the H shares' vote. Because of a lower turnout of H shares' voters, and whether institutional shareholders or retail shareholders should actively vote, The Company should make good use of the votes to affect a positive impact on the Company and shareholders, as well as safeguard their common self-interests.

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