Profile
(Negotiations in final stages – estimated to be announced early 2007)
Located along a major waterway and railroad artery serving both Northwestern
and Eastern seaboard regions
Fully-integrated production capabilities: mining, coking, sintering, iron making,
steel-rolling, steel making
Main products include steel bars, strip steel, tubes, billets, pig iron, and coke
Capacity to produce approximatly 3 million tons of finished product annually
Equipment includes 6 sintering machines, 8 blast furnaces, 4 converters, 3
tandem mills, and 2 oxygenerators
Company has about 659 acres of land and 6500 employees
Annual Revenues expected to be in excess of $1 billion
Earnings impact: roughly 8x increase
Phase II of Growth Plan
Central China Steel Company
Phase II of Growth Plan
Central China Steel Company
Subsidiaries
Iron mine with current reserves of approximately 300 million tons
76% of a rolling mill that produces ribbon steel
39% of a iron and steel company that produces 300,000 tons of billets
90% of a steel company that produces 100,000 tons of rebar
Leased railway lines in the Northwest region’s largest steel trading center
51% of an import-export company
100% of an integrated transportation company - 23 loaders, 13 cranes, 1 excavator, and
160 vehicles
75% of a machinery maintenance company
75% of a company that makes products from steel making waste products
100% of a company producing refractory materials
four other subsidiaries
Phase II of Growth Plan
Central China Steel Company
Key Advantages
Secure resource bases of iron ore, coke, water, electricity, limestone
Iron mine with 300,000 ton reserves
Largest coal deposits in province
Transportation access to major highways, and a special railroad connecting
mine directly to the production site
Located at the Bridgehead to the Western region
Western region targeted by Central government for strong infrastructure
and economic development
Large transportation cost advantage for rebar (main product) - not suited
to long haul transportation
Nearest competitor is 500 km. away
Eligible for Western Region Development reduced tax
Phase II of Growth Plan
Central China Steel Company
Phase III of Growth Plan
Coastal Region Steel Company
Profile
(Negotiations well underway – estimated to be announced later 2007)
Location is in a prime domestic and international transportation hub
Main products include rebar and wire
Capacity to produce 2 million tons annually
Equipment is less than 3 years old and state-of-the art
Hot rollers designed by the top institutes in China
Processing equipment imported from Europe and the U.S.
Production site is 1.4 square kilometers with additional 2.5 square kilometers available
Strong existing distribution base
Current run rate $923 million
Expected purchase price 1.6x earnings
Phase III of Growth Plan
Coastal Region Steel Company
Key Advantages
Owned by a company that is a major customer for steel construction products
Company has not been well managed because its managers have
little steel industry experience
GSHO believes it can show dramatic improvement in performance by
installing its trained and expert management team
Company is a dominant supplier to the construction industry in one of the fastest
growing regions of China. It also has a good export business to South East
Asian countries including Vietnam, Thailand, and Malaysia
Management is willing to sell at a very low price in order to ensure a continuous
source of supply for it’s projects
Additional 2.5 square kilometers are available for developing a steel slab facility
in Phase 2 of this project. Construction is planned for 2010-11. The land is very
close to a large seaport
Phase III of Growth Plan
Coastal Region Steel Company
Coastal Region Steel Company
Projected Consolidated Income Statement (in US$ ,000)
For the Years Ended December 31, 2008, 2009, 2010
Year to Dec.31
2008E
2009E
2010E
TOTAL REVENUE
923,077
1,015,385
1,167,693
Total Cost of Revenue
-824,414
-906,855
-1,042,883
Gross Operating Profit
98,663
108,530
124,810
Selling, General & Admin. Expenses
-15,385
-17,693
-19,816
Net Operating Profit
83,278
90,837
104,993
Other income (expense)
-
-
EBIT
83,278
90,837
104,993
Interest Expense
Profit Before Tax & Minority Interest
83,278
90,837
104,993
Taxation
Net Profit Before Minority Interest
83,278
90,837
104,993
Minority Interest
-16,656
-18,167
-20,999
Net Profit
66,622
72,670
83,995
Phase IV of Growth Plan
Major SOE Steel Company
General Profile
Production Volume: One of China’s leading SOEs
Capable to produce 63 varieties of steel and nearly 2000 specifications of steel
products
Market dominance in key transportation infrastructure product
Nearly 30,000 employees
Over 20 subsidiaries, numerous Joint Ventures and partnerships
Nation-wide distribution and sales network, international sales offices
Phase IV of Growth Plan
Major SOE Steel Company
Major SOE Steel Company
Projected Income Statement (in US$ ,000)
For the Years ending December 31, 2009, 2010
Year to Dec.31
2009E
2010E
TOTAL REVENUE
3,825,000
4,398,750
Total Cost of Revenue
-3,366,000
-3,803,580
Gross Operating Profit
459,000
595,170
Selling, General & Admin. Expenses
-76,500
-84,915
Net Operating Profit
382,500
510,255
Other income (expense)
-
EBIT
382,500
510,255
Interest Expense
-104,000
-106,080
EBT Before Minority Interest
278,500
404,175
Taxation
Net Profit Before Minority Interest
278,500
404,175
Minority Interest
-136,465
-194,004
Net Profit
142,035
210,171
Consolidated Growth Forecast
Consolidated Income Statement (in US$ ,000)
For the Years ending December 31 2006, 2007, 2008, 2009, 2010
Year to Dec.31
2006E
2007E
2008E
2009E
2010E
TOTAL REVENUE
142,253
755,882
2,615,226
6,829,795
7,855,352
Total Cost of Revenue
-135,761
-695,271
-2,376,294
-6,019,856
-6,839,078
Gross Operating Profit
6,492
60,611
238,932
809,939
1,016,275
Selling, General & Admin. Expenses
-2,152
-21,064
-63,772
-150,666
-167,994
Net Operating Profit
4,340
39,547
175,159
659,273
848,281
Other income (expense)
160
-
-
-
EBIT
4,500
39,547
175,159
659,273
848,281
Interest Expense
-2,089
-8,916
-16,929
-123,556
-123,480
EBT bef. Minority Int.
2,411
30,631
158,230
535,717
724,801
Taxation
-
-2,762
-10,422
-27,367
-37,186
Net Profit Before Minority Interest
2,411
27,870
147,808
508,350
687,615
Minority Interest
-769
-11,834
-46,066
-220,237
-295,942
Net Profit
1,642
16,036
101,741
288,113
391,673
No. of O/S Shares
31,250
46,250
56,250
116,250
120,000
EPS
0.05
0.35
1.81
2.48
3.26
Our People
Management Team
Henry Yu: Founder and Chairman of the Board. First private steel enterprise owner in
China (1989), Former CEO of DQ Metal and Sheet; MBA, BA Business Management,
BS in Engineering; China national representative to Asia Pacific Economic
Cooperation (APEC) Development Council
John Chen: Chief Financial Officer. California CPA license; 7 years public and
private practice with US and Chinese companies; BS degree from Cal Poly Pomona.
Bi-lingual English & Chinese
Ross Warner: Director. 17 years management experience with companies working in
Asia; 8 years in China; MBA from Thunderbird; Bi-lingual English & Chinese
Guodong Wang: Director, Chief Technical Officer. Engineer at Anshen Iron and Steel
Company (2nd largest Steel Producer in China), Master’s Degree in Engineering from
Beijing Iron and Steel Research Institute, Professor at Northeastern University,
Shenyang
Our Vision
By 2010, we target to be the largest non-government owned steel product producer in
China
We intend to achieve sales in excess of $6 billion and EPS in excess of $3.50 per share
We target to consolidate operations in Northwest China and establish key subsidiaries in
select markets throughout China
We target to grow our production from 400,000 tons to 16.5 million tons annually and
revenues from $140 million to $6 billion
We intend to grow through aggressive mergers and acquisitions targeting State Owned
Enterprise (SOE) steel companies and selected entities with outstanding potential
For the past ten years we have laid the foundation to execute this strategy and have now
identified 4 key candidates
