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雷达卡
Transport Watch
The volatility will continue
Share prices have rallied 46-103% since mid-February and we have downgraded
three stocks. We think valuations are stretched and that volatility will continue.
We rate COSCO Pacific and Sinotrans at Buy for valuations and earnings
prospects.
Recommendation summary
Price Target Upside/ PER (x) P/B (x) ROE (%)
Stock (HK$) Code Rec 10-Jun price (downside) FY09F FY10F FY09F FY10F FY09F
Sinotrans 0598.HK Buy 1.90 2.50 31.6% 16.0 13.4 0.8 0.8 5.3
COSCO Pacific 1199.HK Buy 10.72 12.45 16.1% 15.6 14.6 1.2 1.1 7.6
China Shipping Dev 1138.HK Sell 11.42 9.00 -21.2% 19.1 15.1 1.5 1.3 7.8
China Merchants 0144.HK Sell 24.95 16.20 -35.1% 20.2 21.4 1.8 1.7 8.7
Pacific Basin 2343.HK Sell 5.51 3.05 -44.6% 10.9 31.1 1.0 1.0 8.9
CSCL 2866.HK Sell 2.40 1.10 -54.2% -9.1 -37.3 0.8 0.8 -8.8
Tianjin Port Dev 3382.HK Sell 3.29 1.35 -59.0% 50.3 41.1 1.6 1.6 2.6
China COSCO 1919.HK Sell 10.50 4.25 -59.5% -19.2 -50.5 2.0 2.0 -9.8
Priced at close of business on 10 June 2009
Source: ABN AMRO forecast
Lower BDI in 2H09 negative to bulk shipping stocks
Transport Watch on 18 February advised investors to Brace for a volatile year in FY09. We
think volatility will continue and believe the bulk shipping companies are currently at the highend
of their valuation ranges for this year. The recent rally is good opportunity to trim, in our
view, and we rate China COSCO, China Shipping and Pacific Basin at Sell. The pace of
vessel cancellations, delays and scrapping is in line with our forecast and too low to resolve
supply issues. Short-term demand, speculation and stockpiling have driven a 97% rise in the
BDI since May but we think this is unsustainable as 60% of this year’s new supply is to be
delivered in 2H09.
No recovery in sight yet for container shipping
We expect Asia-Europe and trans-Pacific trade lanes to make losses in FY09 and FY10.
Attempts to raise Asia-Europe rates in June/July look likely to fail due to poor demand while
the 10-30% drop in trans-Pacific contract rates will drag on FY10 bottom line. The 57% surge
in bunker price since March, that has come despite global economic weakness, will eat into
liner companies’ P&Ls. With idle containership capacity of 10.3% and our projected 2m-TEU
(15.7%) net capacity growth from May 2009-10, pressure on rates is heavy. We reiterate Sell
on CSCL as its valuation is ahead of fundamentals, in our view. We rate Sinotrans a Buy due
to what we see as cheap valuations and a diversified business and its net cash position.
We think port companies are the best medium-term picks
There are signs that the decline in China’s container throughput has moderated, with May
throughput falling 9.7%, a 4pp improvement vs April. As developed economies remain
sluggish, a significant throughput recovery is still not imminent, in our view. However,
capacity supply is better co-ordinated than in the container shipping industry, so rate
pressure is lower. Direct cross-Strait trade also creates opportunities for port companies. We
rate COSCO Pacific at Buy as its earnings is more secured yet its valuations look
undemanding, while we rate China Merchants and Tianjin Port at Sell, due to their rich
valuations and slow throughput recovery.
Contents
Ahead of the fundamentals 3
Recent rallies in bulk and container shipping stocks have run ahead of the
fundamentals. We see downside risk on BDI in 2H09, while meaningful recovery on
container shipping looks at least a year away. Ports look more attractively priced in
the medium term.
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Bulk shipping sector 3
Container Shipping sector 11
Port sector 17
Company profiles 20
China COSCO Holdings 20
China Merchants Hldgs 32
China Shipping Container 40
China Shipping Dev 47
COSCO Pacific 55
Pacific Basin Shipping 62
Sinotrans 69
Tianjin Port Development 76
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