For those who assumed that MTR Corporation Limited (HKG:0066) is in the business of operating the city rail for Hong Kong, think again. The company is a HK$180 billion expanding its operation globally.
MTR Corp operates rail and bus passenger services in Hong Kong. It is most famous for being the sole operator for the Hong Kong’s metro system. On top of that, the company also operates intercity route to Guangdong, Shanghai and Beijing. It also runs the high-speed airport express and a light rail system in the city. On top of that MTR is able to leverage on the station commercial spaces including rental of retail spaces, advertising and telecommunication.
What is not commonly known to the public is its property business. MTR Corp develops residential projects and hold numerous investment properties in the city. Lastly, the company has invested in other rail and property related venture in China such as Beijing and Tianjin. MTR Corp is also the concession holder to operate the London Overground, Stockholm and Melbourne.
All these assets are able to generate huge revenue for the company. In 2013, the company recorded a total revenue of HK$38.7 billion. MTR Corp enjoys high operating margins for its business, chalking up an operating margin of 28.9% in 2013. Most importantly, due to the recurring nature its business, MTR Corp is able to generate positive cash flow from its business. For the past two years, the company has been free cash flow positive.
Yet, it seems there are still growth left in the company. For one, there is as least 5 railway extention projects on-going for the company. Furthermore, there are still a few more which the company is working on to expand its presence more into China. With the Chinese government pushing aggressively on infrastructure in the mainland, it seems that MTR Corp is in a unique position of being a developer and operator of public transportation.Join us on Facebook for more exciting updates and discussion about value investing. Submit your email address for important market updates and FREE case studies!We will only provide you with information relevant to value investing. You can unsubscribe at any time. Your contact details will be safeguarded. The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and does not in any way represent those of his employer and other related entities. Stanley Lim does not own any shares in the companies mentioned above.