Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123</li>
<li>We believe core profitability has also declined to pre-Covid levels for some carriers</li>
<li>
<a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> no longer looks expensive, trading at 70-75% of replacement  cost.</li>
</ul>


After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123
We believe core profitability has also declined to pre-Covid levels for some carriers

Evergreen Marine Corp (2603 TT) no longer looks expensive, trading at 70-75% of replacement  cost.


TRACKING TRAFFIC / Container Shipping: End of the Rollercoaster Ride

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>KDB recently initiated the process of selecting an advisory firm to sell its stake in HMM, which will likely be the first to implement the mandatory offer rule.</li>
<li>Potential bidders include Hyundai Glovis, LX Holdings, and Samsung SDS. As for POSCO Holdings, it recently said that it is not considering acquiring HMM.</li>
<li>Given that HMM is the only national shipping company, there is a good chance that multiple bidders will appear, which will lead to a premium to the market price.</li>
</ul>


KDB recently initiated the process of selecting an advisory firm to sell its stake in HMM, which will likely be the first to implement the mandatory offer rule.
Potential bidders include Hyundai Glovis, LX Holdings, and Samsung SDS. As for POSCO Holdings, it recently said that it is not considering acquiring HMM.
Given that HMM is the only national shipping company, there is a good chance that multiple bidders will appear, which will lead to a premium to the market price.


HMM Is Likely the First to Be Subject to the Mandatory Offer that Comes into Force

<ul>
<li>Targetable names on KOSPI for dividend arbitrage: SK Telecom (017670), Woori Financial (316140), SK Hynix (000660), KB Financial (105560), Korea Zinc (010130), and HMM (011200) </li>
<li>
Samsung Electronics (005930)' basis does not reflect special dividends, even though speculations have not disappeared entirely.</li>
<li>As the current basis hasn't widened to an entirely sufficient level, we need to target arb trade openings focusing on the above stocks a bit more aggressively.</li>
</ul>


Targetable names on KOSPI for dividend arbitrage: SK Telecom (017670), Woori Financial (316140), SK Hynix (000660), KB Financial (105560), Korea Zinc (010130), and HMM (011200) 

Samsung Electronics (005930)' basis does not reflect special dividends, even though speculations have not disappeared entirely.
As the current basis hasn't widened to an entirely sufficient level, we need to target arb trade openings focusing on the above stocks a bit more aggressively.


Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis

<ul>
<li>The additional Lotte Confectionery/Samyang Holdings flow will come from K200/KRX 300 Consumer Staples, K200 MidSmallCap, and K200 Ex-Top. However, the actual flow impact wouldn't be significant.</li>
<li>From a flow trading standpoint, the KOSPI 50's HMM/Hanon System probably deserves our attention because additional inflows come from the pensions that account for more than half of local PASSIVE.</li>
<li>Since their rebalancing trading tends to be somewhat dispersed, the return rate was the best when the position holding period was from T-3 to the effective date.</li>
</ul>


The additional Lotte Confectionery/Samyang Holdings flow will come from K200/KRX 300 Consumer Staples, K200 MidSmallCap, and K200 Ex-Top. However, the actual flow impact wouldn't be significant.
From a flow trading standpoint, the KOSPI 50's HMM/Hanon System probably deserves our attention because additional inflows come from the pensions that account for more than half of local PASSIVE.
Since their rebalancing trading tends to be somewhat dispersed, the return rate was the best when the position holding period was from T-3 to the effective date.


KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points

<ul>
<li>Chairman Kim of the FSC mentioned potential rule changes in disclosing the names of short sellers at the state audit last Thursday.</li>
<li>The first is to reveal the identity of short sellers who traded through a swap contract with a broker, which is currently exempt from the short-selling disclosure obligation.</li>
<li>The second is to disclose the identity of investors caught in illegal short-selling activities, mostly naked short-selling and wall-crossing.</li>
</ul>


Chairman Kim of the FSC mentioned potential rule changes in disclosing the names of short sellers at the state audit last Thursday.
The first is to reveal the identity of short sellers who traded through a swap contract with a broker, which is currently exempt from the short-selling disclosure obligation.
The second is to disclose the identity of investors caught in illegal short-selling activities, mostly naked short-selling and wall-crossing.


Rule Changes in Disclosing the Identities of Foreign Short Sellers in Korea

South Korea

Pan Ocean Co., Ltd. is a Korean shipping company that engages in marine transportation business. The Company provides bulk cargo carrier, pure car and truck carrier, container and tanker services.

Korea Line Corporation (KLC) owns and operates a fleet of vessels that carry bulk cargo, such as iron core, coal, hot coils, and liquefied natural gas (LNG). The Company provides exclusive lines for Pohang Iron & Steel, Korea Gas, and Korea Electric under long term contracts.  KLC also offers tramp services, and transports grain, sugar, logs, minerals, and steel products.

Heung-A Shipping Co., Ltd. provides shipping trade services.  The Company also provides chemical tankers to transport petrochemicals in areas that includes Japan, Taiwan, China, and Southeast Asian regions.

KSS LINE LTD provides marine transportation services.  The Company mainly transports items such as gas and chemical products.  KSS LINE provides worldwide gas product transportation, Far East and South East Asia area for chemical product shipping.

Eusu Holdings Co., Ltd. is a holding company, which operates marine transportation services such as container service, bulk service, terminal service, and ship lease.

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

Hyundai Glovis Co., Ltd. provides domestic and international logistic services. The Company's services include domestic transportation, storage, packaging, vehicle logistic, and logistic consulting.  GLOVIS also runs automobile auction market for used vehicle.

Hanjin KAL Corporation is a holding company. The Company, through its subsidiaries, engages in airline, hotel, and travel related services. Hanjin also invests in real estates.

Sun Kwang Co., Ltd. provides harbor loading and unloading, general and hard goods transportation, warehouse, cargo handling, container handling, and stevedoring services.  The Company also extracts and sells sea sand for ready mixed concrete manufacturing.

CJ Logistics Corporation provides logistics services. The Company provides land transportation, maritime transportation, harbor unloading, cargo storage, international logistics processing, and other services. CJ Logistics also provides internet home shopping services. CJ Logistics serves customers worldwide.

Orient Overseas International Ltd, through its subsidiaries, owns and leases ships, operates terminals, and provides freight forwarding and container transportation services.  The Company also develops and invests in properties, leases equipment, and invests in securities.

Kirby Corporation operates a fleet of inland tank barges.  The Company transports industrial chemicals, refined petroleum products, black oil products, and agricultural chemicals.  Kirby also overhauls and services diesel engines employed in marine, power generation, and rail applications.

Kawasaki Kisen Kaisha, Ltd. operates marine cargo and passenger transportation around the world.  The Company provides ocean liner, bulk carrier, car carrier, unscheduled specialized carrier, and energy transportation services. The Company also offers insurance, warehousing, and land transportation services.  Items transported include automobile, grain, petroleum, coal, iron ore, and wood chip.

MISC Berhad owns ships and operates shipping and related services. Through its subsidiaries, the Company provides trucking, warehousing and forwarding service, containers and prime movers repair, and container haulage. MISC Berhad also has operation in trucking and launch operator.

Yang Ming Marine Transport provides transportation services and handles domestic and foreign maritime services on cargos.  The Company also operates warehouse, wharf, tug, barge, and container freight station services as well as repairs, leases, and sells containers and chassis.

Wan Hai Lines Ltd. provides marine transportation and shipping agent services. The Company also purchases, sells, and leases vessels and containers as well as operates container freight stations.

SITC International Holdings Company Ltd. offers marine shipping services.  The Company offers container liner shipping, freight forwarding, customs clearance, shipping agency, and ship brokerage services.  SITC operates in Asia.

Evergreen Marine Corp. (Taiwan) Ltd. transports freight by ships. The Company operates container ships to move freight throughout the world. Evergreen Marine has interests in terminals, airline operations and motor freight transportation, as well as container manufacturing.

Mitsui O.S.K. Lines, Ltd. provides marine transportation, warehousing, and cargo handling services.  The Company operates container ship, specialized carrier, oil tankers, and ferry.  Items transported include coal, iron ore, grain, logs, aluminum, cement, industrial salt, copper ore, wood chips, paper products, chemical products, gasoline and other petroleum products, LPG, and other cargoes.

COSCO SHIPPING Energy Transportation Co., Ltd. offers marine shipping services. The Company provides refined oil transportation, crude oil transportation, and other services. COSCO SHIPPING Energy Transportation also ships iron ores, dry bulks, coal, and other products.

Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK)

Cosco Shipping Energy Transportation Co. Ltd. (H)

HMM Co., Ltd. provides marine transportation services.  The Company commands different types of vessels including full container vessels, oil tankers, car carriers, LNG carriers, bulk carriers, and tramps.

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HMM Co., Ltd. (011200 KS)

TRACKING TRAFFIC / Container Shipping: End of the Rollercoaster Ride

For container rates and profitability, it's been a wild rollercoaster ride over the past three years. But now shares of pure play Evergreen Marine...

Tracking Traffic

HMM Is Likely the First to Be Subject to the Mandatory Offer that Comes into Force

This post investigates KDB's HMM stake sale reportedly initiated last week and discusses the possibility that this deal will be the first to be...

Sanghyun Park

Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis

This post screens targetable names on KOSPI for dividend arbitrage based on relatively reliable DPS estimates and current basis widening.

Sanghyun Park

KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points

This post details the constituent changes of the sector/size sub-indices of KOSPI 200 and KRX 300, announced by KRX last week and discusses trading...

Sanghyun Park

Rule Changes in Disclosing the Identities of Foreign Short Sellers in Korea

This post explains what FSC Chairman Kim meant by potential rule changes in the short seller identity disclosure, which he mentioned at the state...

Sanghyun Park

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