The YRD was responsible for more than 20% of China's GDP in 2005. Feeding off this success, Shanghai port has fast become the largest port in mainland China in terms of both container and cargo throughput.
For cargo handled and container throughput, it is the world's second and third largest, respectively.
Shanghai Port Container, the publicly traded unit of the port operator, has prospered from this growth, with turnover from its port handling business reaching US$354 million in 2005, 59% of total turnover. The company is also involved in road transportation, agency and other port-related business.
From all its activities, it reported earnings before interest and tax of US$240 million on turnover of US$595 in 2005
Acquisitions of stakes in new port facilities – Waigaoqiao Phase V and Yangshan Phase I – will see its container handling capacity increase by an additional 50%.
The US$16 billion Yangshan Port project (Phase I cost US$1.8 billion) will provide deep water berths that Shanghai currently lacks, allowing it to attract bigger ships with higher cargo volumes. It will also increase Shanghai's throughput from 14.55 million 20-foot equivalent units (TEUs) to 25 million TEUs by 2010, making it the world's busiest port.
Shipping is a cyclical business, and the company's success depends in part on China remaining the world's factory. But growing affluence will see the world focus on feeding Chinese consumers, and throughput will run in both directions, easing uncertainties over export fluctuations.
In the long-run, the uncertainties are few and Shanghai Port Container can be expected to prosper from the proceeds of China's growing two-way trade.
Kweichow Moutai 600519.SH
Kweichou Moutai is a much more accessible buy after emerging from its share reform program. While still formidable at around 45RMB per share, the company's fundamentals suggest its pricing is a result of good spirits rather than speculation.
Moutai is arguably the best-known liquor in the Chinese-speaking world, taking pride of place as China's official national tipple at state functions.
It was famously used by late premier Zhou Enlai to toast former US President Richard Nixon in 1972, and Mao Zedong predicted in 1958 that the 2,000 year-old liquor would one day cross the 10,000 tons per year threshold.
It finally lived up to Mao's billing in 2004, but company president Qiao Hong has no plans for Moutai to rest on its laurels, aiming to double production by 2010 to keep up with demand. The company is on course to meet its production goal, with output increased a further 2,000 tons by 2006, and Qiao predicts turnover to exceed US$1.2 billion by the end of the decade.
It is also working hard on its global presence, bulking out its brand portfolio with the likes of Moutai 30 Year Old, Moutai 50 Year Old, and Moutai 80 Year Old.
Challenges are ahead, most significantly its dependence on water from the Chishui River in northern Guizhou province. The river has been credited for Moutai's unique flavor, but this reliance puts the company at risk from pollution, while the location makes transport to market difficult.
Counterfeiting is a problem but Moutai's unique properties mean copycats are unlikely to fool discerning customers. In addition to being certified a "green and organic food", scientific tests in 2004 found in favor of an advertising claim that drinking Moutai liquor is good for health.
With demand far outstripping supply, Kweichou Moutai is unlikely to ever be burdened with overcapacity and falling prices. Meanwhile, ever more affluent Chinese consumers are likely to be willing to pay a premium for their national liquor.
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