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We are a world's leading ship leasing company and enjoy wide recognition
Established in 2012, we are the first shipyard-affiliated leasing company in Greater China and one of the world's leading ship leasing companies. According to the F&S Report, in terms of revenue in 2018, we ranked fourth in the global ship leasing industry with a market share of 3.9% and first in the global non-bank ship leasing industry with a market share of 14.8%.
In August 2018, the leading group for state-owned enterprise reform under the State Council (國務院國有企業改革領導小組) selected more than 100 subsidiaries of central enterprises and backbone state-owned enterprises, respectively, to implement the “Double Hundred Action (雙百行動)” in state- owned enterprise reform during the period from 2018 to 2020. Our Company has been included in the list of “Double-Hundred Enterprises (雙百企業)”, which we believe is a recognition of our outstanding business performance, established market presence as well as strong development potential.
As a shipyard-affiliated leasing company, we have a unique competitive edge
As the first shipyard-affiliated leasing company in Greater China, we leverage our synergies and close business relationships with shipyards, and possess updated information on the supply and demand in the marine market and our customers' needs, which allow us to capture business opportunities in a timely manner. As at the Latest Practicable Date, we maintained cooperation with 13 shipyards for the provision of ship leasing services to approximately 50 customers in 13 countries and regions. We work closely with shipyards to dig deeper into customers' needs in order to provide professional, one-stop and customised leasing services.
As the sole leasing company under CSSC Group, we benefit from CSSC Group's corporate strategy of “combination of industry and finance (產融結合)”. CSSC Group is a world-class and leading state-owned shipbuilding conglomerate in the PRC, and is a Fortune Global 500 and Fortune China 500 company in 2018. CSSC Group owns a large number of shipbuilding and ship repair corporations, ship design and research institutions, marine support service providers as well as ship trading companies in the PRC, and its resources encompass the entire value chain of the marine industry.
We have strong expertise and extensive experience in the marine industry, which allow us to capture the business opportunities in the marine industry
We possess unique insights into the cyclical conditions of various marine market segments. We are able to grasp industry fluctuations, which allows us to capture cyclical profits. For example, we purchased several newly-built 64,000-tonne bulk carriers in 2013 at low prices, and successfully resold two of them in 2014 at an investment return of approximately 20%. In addition, the value of the assets we held under operating lease arrangements as at 31 December 2018 increased by an average of 11.2% as compared to that at the time of purchase.
Our extensive industry experience and strong industry background have enabled us to lead the industry by being the first leasing company to have established a business layout in relation to offshore clean energy. We have also expanded into the field of clean energy offshore equipment. For instance, since 2015, we have been providing leasing services for two of the world's first polar class heavy transport deck carriers which are vessels for transporting module parts of a construction project to polar regions, to serve in the world's then largest natural gas field. We have also been providing leasing services for the world's first FLNG conversion unit since 2015. In addition, we owned and operated five very large gas carriers and provided leasing services for the first FSRU in China in 2017. Leveraging our first-mover advantage, we believe that we are well positioned to capture the development potential of emerging markets.
Our comprehensive risk management system has allowed us to achieve stability in asset quality
As a leading ship leasing company in Greater China, we have established a comprehensive and effective risk management system, which allows us to maintain sound operations and achieve stability in asset quality. As at 31 December 2018, our non-performing asset ratio was 0.8%, and we made provision for impairment loss on loan receivables of HK$440.3 million, which comprises 12-month expected credit loss of HK$32.7 million for assets under stage 1 and lifetime expected credit loss of HK$222.1 million and HK$185.5 million for assets under stage 2 and stage 3, respectively.
Our risk management system covers various types of risks involved in our business operations. In respect of credit risk management, we assess our risk exposure at every major stage of our business operations, from due diligence, project assessment and approval, contract execution, release of funds to lease management. Our five-category asset quality classification system, which was established with reference to the Guidelines of Asset Risk Classification for Non-bank Financial Institutions (非銀行金 融機構資產風險分類指導原則) published by the CBRC, also allows us to effectively evaluate the quality of our asset portfolio. In addition, we make use of various tools to measure and monitor our liquidity risks on an on-going basis, which enable us to optimise the structure of our assets and liabilities in a timely manner. See “Risk Management” in this prospectus for further details.
Our continuous optimisation of asset portfolio has allowed us to diversify our risk exposure and enjoy performance stability
As at 31 December 2018, we owned a total of 65 vessels, comprising 25 bulk carriers, 14 tankers, 10 container vessels, nine special tonnage carriers and seven marine LNG/LPG units. According to the F&S Report, the demand for bulk carriers, tankers and container vessels, being the three major ship types, are primarily influenced by the macro-economic and trade environment, whereas the demand for marine LNG/LPG units and special tonnage carriers, being vessels in the clean energy sector, are mainly influenced by the energy as well as oil and gas industries. We have a balanced vessel portfolio comprising different types of vessels, which creates a hedging effect among them and allows us to diversify our risk exposure and enjoy performance stability.
Leveraging our extensive experience in the marine industry and through the sharing of customer databases with various shipyards, we possess information on the performance of a large number of customers in multiple rounds of industry cycles, which facilitates our assessment of the performance risks of our customers. Our customers are of high quality and they include (i) a French container transport giant; (ii) the world's largest refined oil transporter, which is a listed company in the United States; (iii) one of the world's largest grain merchants and a Fortune Global 500 company; (iv) the largest bulk carrier owner and a listed company in the United States; (v) two transport giants for the oil and gas industries, which are listed companies in the United States; and (vi) the largest integrated conglomerate in Singapore.
We have an experienced, committed and professional management team
Our success is built on the leadership of our experienced, committed and professional management team. Our management team has an average of 15 years of experience in the marine industry, and possesses solid experience and strong expertise in vessel selection and combination, leasing transactions, technical review, risk management as well as lease management. In particular, each of Mr. Yang and Mr. Hu, our Executive Directors, has more than 25 years of experience in the marine industry, and their strong execution capabilities have allowed us to develop and pursue sustainable business strategies, seize market opportunities as well as anticipate and promptly respond to changes in market conditions. We believe that the insight and strategic vision of our management team will continue to bring business growth and profitability, thereby solidifying our market position in the global ship leasing industry.
Furthermore, since we have employees based in important shipping hubs such as Hong Kong, Shanghai and Singapore, we are able to grasp the opportunities in the global ship leasing industry, and actively pursue and develop new business opportunities in the marine economy.
We benefit from various industry development opportunities as well as regional and national policies
The marine industry is a hub for international trading activities and is closely related to the development of global economy and local industrial level. The global economic recovery has facilitated the recovery of the marine industry from its lowest point in 2016. The global shipping trade volume is expected to increase from 11,901 million tonnes in 2018 to 14,255 million tonnes in 2022, at a CAGR of 4.6%. The increase in global shipping trade volume will provide a favourable environment for the development of the marine and leasing industries. In 2017, the global order volume for new buildings was 85.7 million DWT, representing an increase of 195.5% from 2016, which will create favourable conditions for our business development.
As the global economy continues to improve, the demand for energy is on the rise. In particular, since LNG and LPG are clean, efficient and increasingly available in application, they show growing significance in the energy sector, which is demonstrated by their increasing consumption in the global energy sector. Moreover, LNG and LPG are often extracted from areas not close to the consumption areas. All these factors contribute to the growth of the trade volume of LNG and LPG worldwide, thus stimulating the demand for sea transportation of LNG and LPG. As the sea transportation of LNG and LPG requires specific LNG and LPG vessels, the rapid development of the global LNG and LPG markets plays a significant role in facilitating the development of the marine and ship leasing industries.
Belt and Road Initiatives and long-term strategic cooperation between China and Africa —China’s major national development strategies of the Belt and Road Initiatives and China-Africa strategic cooperation have brought business opportunities overseas. Since 2015, we have been providing leasing services for two polar class heavy-transport deck carriers, which are vessels for transporting module parts of a construction project to polar regions, to serve in the world’s then largest natural gas field, and to a leading offshore LNG operator listed in the United States for a FLNG conversion unit based in Cameroon, which is the world’s first FLNG conversion project.