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

ZIM Integrated Shipping Services / Equity Bottom-Up

<ul>
<li>Price momentum softened dramatically in October, mirroring steep declines in H221, FY22</li>
<li>We believe price momentum, rather than earnings, drives medium-term share performance</li>
<li>Reaction to ZIM's stellar Q324 results &amp; guidance raise suggests more downside ahead</li>
</ul>


Price momentum softened dramatically in October, mirroring steep declines in H221, FY22
We believe price momentum, rather than earnings, drives medium-term share performance
Reaction to ZIM's stellar Q324 results &amp; guidance raise suggests more downside ahead


Monthly Container Shipping Tracker: Price Momentum Softens | CMP-ZIM L/S Pair Idea (November 2024)

HK/China Equity Long-Short

Osbert Tang, CFA

Orient Overseas International / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">Orient Overseas International (316 HK)</a> saw 27.2% QoQ freight rate uptick in 1Q24. This is a positive start and we should not be too concerned about the 12% YoY decline.</li>
<li>Its overall load factor also expanded 0.9pp YoY in the quarter, and this is the first YoY improvement since 2Q22. A better utilisation level is good for unit costs.</li>
<li>At end-FY23, net cash equals 62.4% of the share price, dragging ROE to 7.5% for the next three years. But with such solid financials, its 0.7x P/B is not expensive.</li>
</ul>



Orient Overseas International (316 HK) saw 27.2% QoQ freight rate uptick in 1Q24. This is a positive start and we should not be too concerned about the 12% YoY decline.
Its overall load factor also expanded 0.9pp YoY in the quarter, and this is the first YoY improvement since 2Q22. A better utilisation level is good for unit costs.
At end-FY23, net cash equals 62.4% of the share price, dragging ROE to 7.5% for the next three years. But with such solid financials, its 0.7x P/B is not expensive.


Orient Overseas Intl (316 HK): Spotting Initial Signs of Recovery

<ul>
<li>Together with the just-announced HK$0.40 special DPS, <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> has already handed back HK$1.12/share to shareholders YTD, realising a dividend yield of 6.5%.</li>
<li>Its 3Q24 performance is impressive, with revenue surging 56.6% YoY. Both volume (+13.4%) and average freight rates (+44.1%) have exhibited solid momentum. </li>
<li>While the consensus forecasts have been upgraded by 7-11% since the 1H24 result, there appears more room to go. FY24 ROE is now expected to be 32.2%.</li>
</ul>


Together with the just-announced HK$0.40 special DPS, SITC International (1308 HK) has already handed back HK$1.12/share to shareholders YTD, realising a dividend yield of 6.5%.
Its 3Q24 performance is impressive, with revenue surging 56.6% YoY. Both volume (+13.4%) and average freight rates (+44.1%) have exhibited solid momentum. 
While the consensus forecasts have been upgraded by 7-11% since the 1H24 result, there appears more room to go. FY24 ROE is now expected to be 32.2%.


Equity Capital Markets

<ul>
<li>In terms of fleet characteristics, market exposure, and recent financial performance, we believe <a href="https://www.smartkarma.com/entities/t-s-lines" target="_blank" data-smartkarma-citation="entities:39795:1" rel="noopener">T.S. Lines (TSL HK)</a> and Taiwan's <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a> are directly comparable</li>
<li>WHL has more exposure to the Transpacific, but still boasts a much larger Intra-Asia operation owing to its scale advantage (fleet and revenue about four times the size of TSL)</li>
<li>Given the similarities we outline in this insight, we believe TSL's shares should trade at EV/Fleet and EV/Revenue multiples in line with WHL's; no premium is justified, in our view</li>
</ul>


In terms of fleet characteristics, market exposure, and recent financial performance, we believe T.S. Lines (TSL HK) and Taiwan's Wan Hai Lines (2615 TT) are directly comparable
WHL has more exposure to the Transpacific, but still boasts a much larger Intra-Asia operation owing to its scale advantage (fleet and revenue about four times the size of TSL)
Given the similarities we outline in this insight, we believe TSL's shares should trade at EV/Fleet and EV/Revenue multiples in line with WHL's; no premium is justified, in our view


TS Lines Pre-IPO | Like Wan Hai Lines, but Smaller | Intra-Asia Update | Approaches to Valuation

<ul>
<li>The 72.5% decline in <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a>'s FY23 earnings is disappointing but should already reflected in the share price given the profit warning. Instead, this may be the trough.  </li>
<li>Spot freight rates for key intra-Asia routes have already recovered since 3Q23, with the YTD level higher than the 2H23 average. The 1H24 result may show a sequential rebound.</li>
<li>Even assuming flat YoY earnings in FY24, it still sits on a 9% dividend yield. The projected ROE of over 24% and net cash position mean 1.6-1.7x P/B undemanding.</li>
</ul>


The 72.5% decline in SITC International (1308 HK)'s FY23 earnings is disappointing but should already reflected in the share price given the profit warning. Instead, this may be the trough.  
Spot freight rates for key intra-Asia routes have already recovered since 3Q23, with the YTD level higher than the 2H23 average. The 1H24 result may show a sequential rebound.
Even assuming flat YoY earnings in FY24, it still sits on a 9% dividend yield. The projected ROE of over 24% and net cash position mean 1.6-1.7x P/B undemanding.


SITC International (1308 HK): Bidding Farewell to the Trough

Hong Kong

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.

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Orient Overseas International (316 HK)

Monthly Container Shipping Tracker: Price Momentum Softens | CMP-ZIM L/S Pair Idea (November 2024)

Container price momentum faltered again in October, and we believe spot rates will continue to moderate near-term. Negative reaction to ZIM's...

Tracking Traffic

Orient Overseas Intl (316 HK): Spotting Initial Signs of Recovery

OOIL shows a QoQ freight rate uptick at 27.2% in 1Q24, with the load factor improving 0.9pp YoY. Given that 62.4% of the stock price is net cash,...

Osbert Tang, CFA

SITC International (1308 HK): Unbeatable

SITC's 3Q24 is impressive with surging revenue, solid volume, and good freight rates. Consensus forecasts upgraded, and more room to grow. The DPS...

Osbert Tang, CFA

TS Lines Pre-IPO | Like Wan Hai Lines, but Smaller | Intra-Asia Update | Approaches to Valuation

Intra-Asia container carrier TS Lines filed to list its shares in Hong Kong (again) at the end of May, and its filing included full-year 2023...

Tracking Traffic

SITC International (1308 HK): Bidding Farewell to the Trough

SITC's disappointing FY23 earnings decline may be already priced in. With sequentially higher freight rates, there is a potential for a rebound in...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Monthly Container Shipping Tracker: Price Momentum Softens | CMP-ZIM L/S Pair Idea (November 2024)

Container price momentum faltered again in October, and we believe spot rates will continue to moderate near-term. Negative reaction to ZIM's...

Tracking Traffic

Orient Overseas Intl (316 HK): Spotting Initial Signs of Recovery

​OOIL shows a QoQ freight rate uptick at 27.2% in 1Q24, with the load factor improving 0.9pp YoY. Given that 62.4% of the stock price is net cash,...

Osbert Tang, CFA

SITC International (1308 HK): Unbeatable

​SITC's 3Q24 is impressive with surging revenue, solid volume, and good freight rates. Consensus forecasts upgraded, and more room to grow. The DPS...

Osbert Tang, CFA

TS Lines Pre-IPO | Like Wan Hai Lines, but Smaller | Intra-Asia Update | Approaches to Valuation

Intra-Asia container carrier TS Lines filed to list its shares in Hong Kong (again) at the end of May, and its filing included full-year 2023...

Tracking Traffic

SITC International (1308 HK): Bidding Farewell to the Trough

​SITC's disappointing FY23 earnings decline may be already priced in. With sequentially higher freight rates, there is a potential for a rebound in...

Osbert Tang, CFA

OOIL shows a QoQ freight rate uptick at 27.2% in 1Q24, with the load factor improving 0.9pp YoY. Given that 62.4% of the stock price is net cash,...

SITC's 3Q24 is impressive with surging revenue, solid volume, and good freight rates. Consensus forecasts upgraded, and more room to grow. The DPS...

SITC's disappointing FY23 earnings decline may be already priced in. With sequentially higher freight rates, there is a potential for a rebound in...