Our Business

Business Model

Our business consists of cargo uploading and unloading and related ancillary value-added port services. We currently operate two terminals, which we completed construction and commenced operations in April 2010 and March 2011, respectively. The terminals are located in the Shuidong port area of the Port of Maoming in Maoming, with a total annual designed capacity of 3,174 thousand tonnes of throughput as at 31 December 2017. According to the Ipsos Report, we own the largestport area and the berth with the deepest draft in the Port of Maoming. We are also the largest handler of bulk cargo, such as coal and fuel oil in the Port of Maoming. We provide our customers with uploading and unloading services for domestic trade and foreign trade, covering a variety of cargo types which include primarily bulk cargo such as coal, quartz sand, oil products, grain, asphalt and kaolinite, as well as a small portion of break bulk cargo and neo-bulk cargo. In respect of our uploading and unloading services, our terminals recorded high utilisation rates during the Track Record Period. For 2015, 2016, 2017, our Tianyuan Terminal had a utilisation rate of 100.8%, 106.7% and 109.1%, respectively. In these same periods, our Zhengyuan Terminal had a utilisation rate of 204.3%, 216.4% and 233.9%, respectively. We also lease our oil tanks, grain barns and shovel trucks to our customers as ancillary value-added services. As at 31 December 2017, we had five oil tanks, three grain barns and eight shovel trucks available for lease.

OUR FACILITIES AND EQUIPMENT

We operate two terminals, namely, Tianyuan Terminal and Zhengyuan Terminal, which are open to the public and are specifically for bulk cargo. We are equipped to handle a variety of cargo, such as coal, quartz sand, oil products, grain, asphalt and kaolinite. Our terminals are well-equipped with quayside portal cranes, shovel trucks, loaders, forklift trucks, grab buckets, overhead crane hooks and general purpose trucks, which are operated by qualified technicians. We also possess oil tanks and grain barns for our related ancillary value-added port services.

Our Tianyuan Terminal commenced its operation in April 2010. It has two berths, both of which have been approved to handle foreign trade since January 2011. Tianyuan Terminal currently has the maximum docking capacity of 30,000 DWTs, and is the only terminal with such a large capacity in the Port of Maoming which is open to the public. Our Zhengyuan Terminal commenced its operation in March 2011. It currently has one berth with the docking capacity of 10,000 DWTs. Zhengyuan Terminal contains 11 stacking yards with a total area of approximately 42,202 sq.m. The three grain barns has a total storage volume of approximately 50,424 cubic metres.

Equipment maintenance, repair and upgrade

We mainly maintain and repair our production machinery through our in-house maintenance department. We conduct routine checkup before the startup of the production machinery for production. Our maintenance personnel is responsible for the periodic inspection of the production machinery as well as conducting repair in the event that mechanical breakdown takes place. Certain of our machinery suppliers provide repair and maintenance training to our maintenance personnel upon the delivery of machinery and provide remote technical support to us. In addition, we consult third party repair and maintenance service providers on an as-needed basis.

Our key equipment is on average less than six years old. To improve production efficiency, we will from time to time roll out aging equipment by taking into account their life span and costs. We do not expect substantial replacement or upgrade of our existing major equipment within the next twelve months.

OUR SERVICES

Our services include (i) cargo uploading and unloading services, where we handle a variety of cargo, which mainly include bulk cargo such as coal, quartz sand, oil products, grain, asphalt and kaolinite, as well as a small portion of break bulk cargo and neo-bulk cargo, and (ii) related ancillary value-added port services, which mainly include storage services at our oil tanks and grain barns as well as lease of our shovel trucks. The temporary storage services we provide at our stacking yards are ancillary to our cargo uploading and unloading services and we do not charge additional fees for such services. We are not responsible for fees incurred in connection with the customs clearance relating to foreign trade, which is usually borne by the shippers, buyers and carriers, as the case may be, according to the agreements among them.

Every shipment is subject to cargo handling fees and, in the case of foreign trade, port facilities security fees. Other fees may or may not apply to any given shipment.

Cargo uploading and unloading services

Our major steps of business flow are set out as follows:

  • Step one: Our sales personnel enter into cargo handling agreements with our customers and identify vessels.
  • Step two: We coordinate and allocate docking berth and stacking yards based on vessel schedules.
  • Step three: We report to the marine authority and the shipping and port authority with respect to the docking plan.
  • Step four: We contact the vessel carrier and confirm the docking time. We also notify our production department to make the necessary preparations.
  • Step five: Following the docking of the vessel, we inform the cargo owner. Upon the cargo owner’s confirmation, we notify our production department to start unloading.
  • Step six: After the cargo handling is completed, we confirm the cargo volume with the cargo owner and the vessel carrier before the vessel departs.
  • Step seven: Our finance department keeps records of the services and issues bills in due course.
  • Step eight: We visit our customers on a regular basis for their feedback on our services.

The chart below demonstrates the major steps for our liquid bulk handling.

The chart below demonstrates the major steps for our dry bulk cargo handling.

Ancillary value-added port services

We also provide storage services, on an as-needed basis, with our cargo uploading and unloading customers who require the storage of liquid bulk, grain and coal at our oil tanks, grain barns and stacking yards. As at 31 December 2017, Tianyuan Terminal had five oil tanks with a total capacity of 21,000 cubic metres while Zhengyuan Terminal had three grain barns with a total storage volume of approximately 50,424 cubic metres. For 2015, 2016, 2017, the rental income generated from our storage services was RMB1.2 million, RMB1.7 million and RMB3.7 million, respectively. As at 31 December 2017, we also had 11 shovel trucks, 8 of which can be rented by our cargo uploading and unloading customers on an as-needed basis.

CUSTOMERS, SALES AND MARKETING

Customers and sales

Our customers are mainly cargo purchasers and sellers as well as their agents. We have established an extensive customer base in the PRC, primarily through our sales personnel in Maoming. As at 31 December 2017, our sales team consists of 19 employees, who are responsible for (i) market survey and information collection, (ii) development of new customers, (iii) implementation of marketing strategies, and (iv) liaising with customers. For 2015, 2016, 2017, we had transactions with 121, 148 and 166 customers, respectively, each of whom we considered an active customer. For each year of the Track Record Period, we had a total of 314 active customers remained relatively stable and throughout the Track Record Period, we had a total of 314 active customers in 19 provinces. As at the Latest Practicable Date, we had established business relationships with most of our customers for an average of more than one year, with the longest period of relationship being six years.

Our services are synchronised with the major industries in Maoming, including petroleum refining, petrochemicals, raw chemicals and chemical products, mining, energy resources and agricultural products processing, as well as in our hinterland. Maoming is known as one of the largest petrochemical production bases in the PRC and one of the agricultural production bases in Southwest China. It is also known for its mineral resources which include oil shale, kaolinite and jade. We have maintained long-term relationships with certain leading companies in the petrochemical, mining and energy resources industries based in Maoming.