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雷达卡
China Port Sector
SECTOR REVIEW
Is a worst-case industry downturn in the prices?
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Our telephone interviews with a number of exporters and the relevant
industry associations all point to poor export order flows for 2009. The
deterioration of container volume growth is faster than our expectation.
Our study shows that China’s container port industry is more sensitive
to global demand now than at anytime before. We expect China to see
only 2.5% YoY growth in container throughput in 2009, while Shanghai,
Shenzhen and Qingdao will see negative growth, the lowest in history.
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Most coastal ports should still be able to maintain utilisation above
70%, a level that should enable them to keep tariffs unchanged. The
oligopoly market nature and improved efficiency and services are the
ports’ bargaining chips with shippers.
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We lower our 2008-10E earnings forecast for the port stocks and now
expect most to suffer earnings declines in 2009, given the poor volume
growth outlook. Volume would need to fall by more than 50% YoY in
2009 for ports to make a loss, which we think is impossible. Even
assuming both volume and prices fall 20% YoY, which we think is a
worst-case industry downturn, all the port companies would still make
money, with net gearing of less than 50% and low refinancing risks.
■
While we expect weak global demand and earnings risks to be an
overhang on the sector, with prices correcting over 70% YTD and
FY09E P/B falling to 0.7x for H-share port stocks, we do see investment
opportunities for value investors. We rate DP our top pick as it is the
only stock to see recurrent EPS growth in 2009, but trading at low
valuations. We see very limited downside in CP and XIPC which are
trading below trough valuations. CMHI remains our long-term core
holding in the sector as we rank it the best in terms of strategy
development and execution, underpinning its longer-term growth.
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