• We forecast container throughput will decline by 9% 2009; ASPs will deteriorate.
• BUY DP: Top pick, with a unique product mix. BUY CMH: Trough valuation leaves limited downside risk.
• Initiate CP with a REDUCE. Port holding company with 50%+ exposure to cyclical business implies downside risk.
Rough weather ahead
The worst downturn in the decade
We estimate that the container segment will be the most vulnerable to
reduced foreign trade. Based on our in-house economists’ worst-case
scenario, we assume container throughput will decline by 9% in 2009.
We forecast ASP deterioration due to the declining utilization rate, tariff
cuts and an increasing proportion of empty boxes.
Industry demand/supply analysis
Through demand/supply analysis, we believe that second-tier coastal
ports will be more resilient than first-tier ports; northern coastal ports will
fare better than ports in the Pearl River Delta (PRD) and Yangtze River
Delta (YRD). Ports in the PRD should see the worst downside due to: 1)
more exposure to US and EU trade; 2) being mature, with high
throughput volume bases and intense competition; and 3) having high
tariffs, with room to fall.
Growth momentum will slow; BUY on DP and CMH
Dalian Port (DP) is our top pick in the sector. It is the least vulnerable to
the downturn, due to its unique product mix. BUY, with TP at HKD2.88.
Incorporating weak container throughput growth and disposal of noncore
business, we cut our 2009-10 earnings estimates by 21%-41% for
China Merchants Holdings (CMH) and lower our TP to HKD18.40 (par
value to SoTP). Its price premium as a port flagship company is
disappearing. Its current valuation (1.1x 2009 P/BV) implies limited
downside risk.
Initiate CP with a REDUCE
For COSCO Pacific (CP) we use DCF to value port and container
leasing businesses, and an earnings multiple (5.0x) for container
manufacturing and logistics. Based on par value to SoTP, we derive a
TP of HKD5.76. Initiate with a REDUCE given its 50% exposure to
cyclical business segments. A port holding company with half its
earnings from cyclical business should not deserve industry average
valuation. Our TP suggests 20% downside potential.
Contents
Prepared for the worst ................................................................................................... 3
DCF-based TP 4
Stock picks 4
Tough 2009 with depressed volume growth.................................................................. 8
Export and import contraction 8
Container throughput-downward trend started 9
Container throughput growth forecast 9
This downturn: Worse than the last two 11
Demand/supply in coastal areas.................................................................................. 13
Bohai Bay area – the most stable area in China 13
YRD area: a consolidated market 14
PRD area – nowhere to hide 15
ASP deterioration from utilization and product mix 16
China’s monthly container-throughput ......................................................................... 18
Company updates........................................................................................................ 21
China Merchants Holdings 22
Dalian Port 31
COSCO Pacific 37
fuguitop 金币 +10 金钱 +100 魅力 +50 经验 +50 汇总奖励!谢谢分享,再接再厉 O(∩_∩)O 2009-2-23 13:57:23