20171024-中国银河国际证券-SHIPPING_and_PORT_INDUSTRY_UPDATE_4页_457kb

Shipping and Port Industry Summary

Core Content

This document provides an analysis of the shipping and port industry, with a focus on the performance of various segments and companies, particularly in the context of the Hong Kong stock market. The key themes include market dynamics, company-specific developments, and the potential for recovery in different sub-sectors.

Main Points

1. Sector Performance Divergence

• Container Shipping: Underperformed due to the decline in the CCFI (China Export Containerized Freight Index), which peaked in July 2017 and has since declined. The analyst notes that short positions in COSCO Shipping have increased, indicating investor caution.
• Dry Bulk Shipping: Shows more positive trends, with the BDIY (Baltic Dry Index) reaching a 3-year high in October 2017. The analyst believes that dry bulk could outperform container shipping due to better supply/demand dynamics.
• Port Operators and Shipping Container Manufacturers: Expected to outperform container shipping companies. China Merchant Port Holdings (CMPH) is highlighted as a potential winner due to its strong organic growth and expansion strategy.
• Tanker Rates: Remain low, but COSCO Shipping Energy is seen as a potential recovery play due to the aging VLCC (Very Large Crude Carrier) fleet.

2. Key Companies and Trends

• COSCO Shipping:
  • Shares increased by 4.1% recently.
  • Concerns about over-supply and a potential peak in the container shipping cycle have capped its upside.
  • Management aims to complete a transaction by the end of 2017, which may support its share price.
• OOIL (Ocean Network Express):
  • Shares are supported by a GO price of HK$78.67 per share.
  • Expected to outperform COSCO Shipping due to its strong performance in the container shipping segment.
• CMPH (China Merchant Port Holdings):
  • Achieved 8.0% YoY growth in throughput in September 2017.
  • Organic growth was 7.5%, exceeding management's guidance of 5-6%.
  • Likely to benefit from industry consolidation and global expansion.
• CIMC and Singmas:
  • Container manufacturers that have performed well.
  • Their share prices may be supported by positive news flow from US container leasing companies.

3. Market Dynamics and Outlook

• Container Shipping:
  • The container recovery story has been in the market for some time.
  • The CCFI has declined significantly since 2016, leading to weak performance.
  • The analyst suggests that the container leasing sector in the US has driven sentiment for container-related names.
• Dry Bulk Shipping:
  • The BDIY reached a 3-year high, indicating strong demand for hard commodities like iron ore.
  • Seasonal factors and the start of the grain harvest season in North America may offset any potential correction in the BDIY.
  • The analyst believes the supply/demand dynamics for dry bulk are more favorable than for container shipping.
• VLCC Rates:
  • Hit a trough in September 2017 and are expected to rise in 2018.
  • About 20% of the global VLCC fleet is over 15 years old and will be phased out, improving supply/demand balance.

4. Investor Sentiment and Catalysts

• Investors are likely to chase port operators like CMPH due to the theme of industry consolidation and expansion.
• Dry bulk shipping companies such as Pacific Basin and Sinotran Shipping may benefit from the strong BDIY performance.
• Container manufacturers may be supported by news from the US container leasing sector.
• COSCO Shipping Energy could be an interesting investment for those seeking recovery plays.

5. Valuation and Performance Metrics

• The PE and EV/EBITDA metrics for various companies are discussed, showing mixed valuations.
• The analyst notes that the trading liquidity of dry bulk shipping companies is lower than for container shipping companies, so investors may wait for company-specific news to trigger a price increase.

Key Information

• CCFI peaked in July 2017 and has been in decline since, with a strong base in Q4 2016.
• BDIY reached a 3-year high in October 2017 due to increased demand for hard commodities.
• COSCO Shipping is facing increased short positions due to concerns over the container shipping cycle.
• CMPH is expected to outperform due to strong organic growth and expansion.
• VLCC rates are expected to rebound in 2018, supporting COSCO Shipping Energy.
• CIMC and Singmas may benefit from the performance of US container leasing companies.
• Dry bulk shipping is seen as more resilient than container shipping, with better supply/demand dynamics.
• Investors are advised to revisit dry bulk shipping companies as the BDIY continues to perform strongly.

Conclusion

The analyst believes that while container shipping is currently underperforming, dry bulk shipping, port operators, and shipping container manufacturers may outperform. COSCO Shipping is expected to be capped due to concerns over the container shipping cycle, while OOIL is seen as a better choice for investors who want to remain long in the container shipping market. The analyst also highlights the potential for recovery in the VLCC segment, suggesting that COSCO Shipping Energy may be an attractive investment for those looking for recovery plays.