[外行报告] 瑞士信贷：2009年亚洲交通运输行业展望 [推广有奖]

Asia Transportation Sector
MONTHLY
2009 outlook and reality check
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What needs to be done after the recent rally? Most transportation subsectors
have had a good run, with some stocks up more than 50% in
the past month and more than double from the bottom. Valuations are
still inexpensive overall but not all are distressed anymore (e.g., some
bulk carriers are around 1.0x book and P/NAV). We think the latest rally
reflected the market view that 2009 earnings will be bad (and loss
making for some), but stocks are not going under. We still have a
positive bias towards the sector, given the potential demand recovery
in 2H09. However, for further stock reratings, we would need to see
signs of a recovery in fundamentals (e.g., data turning “less bad”).
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We prefer stocks with better fundamentals and lower valuations. Our
reality checks suggest no clear sign of improvement in the operating
environments. In fact, for airlines, container shipping and ports, we
saw further deterioration in traffic/volume and yield/rates. For dry bulk
shipping, there is no visible pick-up in demand. With uncertainties
about the exact timing of a recovery, we suggest investors take profit
on the high beta (high risk) stocks now. We prefer quality names with
strong track records, better fundamentals and lower valuations (see
below). These should also benefit from an economic recovery, but
have more downside support if a recovery occurs later than expected.
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The 2009 operating environment should continue to be very difficult.
That said, given the early cycle nature of these sectors with valuations
beaten down, we see short-term opportunities. The first emerging theme
is the implementation of government stimulus programmes (China and
globally). The key beneficiaries are the China infrastructure and dry bulk
shipping sectors. The second is the potential global economic recovery
in 2H09, in which we think investors should select value names in the
container shipping, ports and airlines sectors. Shipbuilding is a sector to
avoid on further correction in newbuild prices.

2009 outlook and reality check
2008 difficulties = 2009 opportunities
We expect negative news flow and poor financial/operating results, to cause severe
volatility to share prices or even lead to downside at least in the first half of 2009. That
said, we see two key themes emerging. Firstly, major economies experienced rapid
slowdown or even recession in 2008, and thus governments globally are taking various
measures, including aggressive monetary easing and fiscal stimulus packages, to boost
domestic economies and “restart” the credit market to help facilitate businesses and
trades. For example, China’s Rmb4 tn fiscal stimulus package is likely to be focused on
infrastructure and earthquake reconstruction. We suggest investors to play this theme
through China infrastructure and construction plays (key beneficiaries of China
accelerated infrastructure spending) and dry bulk carriers (beneficiaries of potential BDI
rebound on trade financing conditions and improving commodities demand).
Early cycle plays for potential 2H09 demand recovery
Secondly, some sub-sectors like airline, shipping and ports are early-cycle cyclical plays,
which usually move ahead of global economic cycles. CS economists expect US and
Europe economic growth to bottom between 2Q09E and 3Q09E (but positive growth is not
seen to come in until 2010) and global GDP growth to follow suit in 3Q09E. While we
realise that economic forecasts are subject to change given the current volatile situation,
and timing the exact bottom is difficult if not impossible, we think we are closer to the
bottom and the entry points for some of these should be around 2Q09.
Within the transportation space, we think shipbuilding is a sector to avoid, as we expect
newbuild prices to collapse on lack of demand and global backlog contraction. Moreover,
we expect significant vessel order cancellations or delays, especially in the dry bulk
shipping sector, given the impact of global credit crunch.
Reality check on sector fundamentals
For airlines, passenger traffic has been weakening but load factors have started to
deteriorate fast since early 4Q08. We think this will have a big negative impact on yields
(ex-fuel surcharges). The airfreight market continues to be very weak. On the positive
side, Chinese airlines showed passenger traffic improvement in November off a low base.
There is no pick-up in demand for dry bulk shipping yet. De-stocking of steel in China
continues, but iron ore inventory at ports has come off gradually. Port congestion picked
up slightly in November/December but not to a critical level. Without much improvement in
trade financing and the potential halt in production in China due to the approaching
Chinese New Year (late January), we do not expect significant BDI rebound soon. For
container shipping, cargo volumes and freight rates will come under more downward
pressure in the coming months, as we enter the slack season while consumer spending in
the US and Europe remains weak. Oversupply is still an issue but stock valuations have
factored in a lot of bad news. Chinese ports face similar problems with unprecedented
slow demand growth – November throughput growth was down to 4% YoY (with some
ports even reporting negative numbers). As the peak season ends, we think throughput
numbers should continue to be weak.
We think adjustments in newbuild prices have just started in the shipbuilding sector.
Vessel newbuild prices have generally fallen by 7-11%, less than charter rates and spot
freight rates of most vessel types. With new demand expected to dry up, plus high order
cancellations (mainly from Chinese yards), we think the downward correction in newbuild
prices will take time to finish.

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