20150407-高盛-Transportation__Shipping_15页_425kb

Asia Pacific: Transportation: Shipping Summary

Core Content

This report provides an analysis of container liner performance in 2014 and outlook for 2015, with a focus on the Asia-Pacific region. It highlights key performance metrics, market trends, and investment recommendations for major container shipping companies.

Main Points

2014 Performance Highlights

1. Scale is not the only factor for superior returns:

   • OOCL and Wan Hai, despite being the 12th and 20th largest container liners, ranked 4th and 2nd in EBIT margins, respectively.
   • Their success is attributed to a strong focus on returns, yield management, and exposure to the less volatile Intra-Asia trade.

2. Asia-Europe trade was profitable in 2014 but may weaken in 2015:

   • Higher rates and lower unit costs from mega-vessels boosted margins on the Asia-Europe route in 2014.
   • However, the report anticipates a decline in profitability for this route in 2015 due to weak volume growth and high scheduled capacity growth.

3. Unit cost savings were achieved by most carriers, but some were exceptions:

   • NOL, CSCL, and Hanjin recorded volume declines due to route rationalization and US port congestion.
   • These carriers are expected to benefit from margin recovery in 2015-16E, with NOL projected to achieve a 10% unit cost reduction.

2015 Outlook

1. Sequential margin improvement expected in Q1 2015:

   • The report forecasts a 6.5pp year-on-year increase in EBIT margins for Asia liners in Q1 2015, reaching 3.2%.
   • This is supported by stable rates, lower fuel costs, and easing US port congestion.

2. Transpacific trade is expected to outperform:

   • The Transpacific route is viewed as more favorable for 2015, with higher volume growth and positive contract rate expectations.
   • Carriers with significant Transpacific exposure, such as OOIL, NOL, and Evergreen, are highlighted as top picks.

3. Market conditions and trade dynamics:

   • Asia-Europe spot rates have collapsed due to weak load factors and overcapacity.
   • The report anticipates a re-rating of container line stocks to above mid-cycle asset multiples by 2016E.

Key Information

Investment Recommendations

• OOIL: Maintained as a top pick (CL-Buy), with a 12-month target price of HK$67.
• NOL: Maintained as a Buy, with a 12-month target price of HK$1.00.
• Evergreen: Maintained as a Buy, with a 12-month target price of NT$25.
• Wan Hai and Yang Ming: Maintained as Neutral.
• CSCL and China COSCO: Maintained as Neutral or Sell, based on performance and market exposure.

Financial Highlights (2015E)

Valuation Metrics

Key Risks

• Industry-wide risks: Slower-than-expected recovery, poor capacity discipline, and volatile bunker fuel prices.
• Company-specific risks:
  • Evergreen: Bunker fuel price volatility and weaker-than-expected recovery in the container industry.
  • Wan Hai: Surging bunker fuel prices and worse-than-expected supply/demand balance.
  • Yang Ming: Similar to Wan Hai, with risks from bunker fuel prices and supply/demand balance.
  • NOL: Potential impact from bunker fuel price volatility and Transpacific trade performance.

Conclusion

The report underscores the importance of route exposure and cost management in the container shipping sector. While the Asia-Europe trade faces challenges, the Transpacific trade is expected to drive better performance in 2015. OOIL, NOL, and Evergreen are highlighted as strong investment opportunities due to their significant Transpacific exposure and improved financial fundamentals.