Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/114/303/original/BANNER-CARGO-FINAL.png?1579444685" class="editor-image img-responsive" data-smartkarma-image-id="114303"></figure><p></p><p></p><p>In H119, container shipping rates in the key Transpacific Eastbound tradelane held up well despite tepid demand, as fleet expansion in most of 2019 was modest and some peak season (Q3) demand was probably pulled forward to avoid the threat of new tariffs on Chinese goods moving to the US.</p><p>But it appears key Transpacific Eastbound rates have been declining since late Q3 or early Q4, and we believe profitability probably peaked in Q3 for most carriers. The measures we track suggest average rates declined by 4-5% YoY in November and December. </p><p>With Transpacific Eastbound under pressure and fuel prices still high, we believe near-term earnings are likely to decline for most container shipping companies. Despite optimism about the potential for improved trade relations between the US and China, we would avoid the segment for now.</p>

In H119, container shipping rates in the key Transpacific Eastbound tradelane held up well despite tepid demand, as fleet expansion in most of 2019 was modest and some peak season (Q3) demand was probably pulled forward to avoid the threat of new tariffs on Chinese goods moving to the US.But it appears key Transpacific Eastbound rates have been declining since late Q3 or early Q4, and we believe profitability probably peaked in Q3 for most carriers. The measures we track suggest average rates declined by 4-5% YoY in November and December. With Transpacific Eastbound under pressure and fuel prices still high, we believe near-term earnings are likely to decline for most container shipping companies. Despite optimism about the potential for improved trade relations between the US and China, we would avoid the segment for now.

TRACKING TRAFFIC/Containers & Air Cargo: For Most Box Carriers, Profitability Likely Already Peaked

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>A double-dose of StubWorld this week: </p>
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<p>Port operators, including <a href="https://www.smartkarma.com/entities/china-merchants-port-holdings-company-ltd" target="_blank" data-smartkarma-citation="entities:15155:1" rel="noopener">China Merchants Port (144 HK) ("CMPH")</a>, have rebounded from 2019 lows amidst a period of calm in Hong Kong and "phase one" of the US/China trade deal. A JV with <a href="https://www.smartkarma.com/entities/cma-cgm-sa" target="_blank" data-smartkarma-citation="entities:23994:1" rel="noopener">CMA CGM SA (144898Z FP)</a> provides further positive news for CMPH.</p>
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<p>Preceding my comments on CMPH <em>and </em><a href="https://www.smartkarma.com/entities/wheelock-co-ltd" target="_blank" data-smartkarma-citation="entities:52:1" rel="noopener">Wheelock (20 HK)</a> are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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A double-dose of StubWorld this week: 

Port operators, including China Merchants Port (144 HK) ("CMPH"), have rebounded from 2019 lows amidst a period of calm in Hong Kong and "phase one" of the US/China trade deal. A JV with CMA CGM SA (144898Z FP) provides further positive news for CMPH.


Preceding my comments on CMPH and Wheelock (20 HK) are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: The Rising Tide As China Merchants Port Recovers

Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

<p>The recent deal between CMA CGM and China Merchant Port Holding (CMPH) will be a win-win for both parties. While CMA CGM  gets the necessary cash to lower its leverage, CMPH gains geographical footprint well aligned with China’s maritime silk route initiative. However, the deal has an accounting complication, which an analyst should consider while forecasting CMA CGM's debt obligation.</p>

The recent deal between CMA CGM and China Merchant Port Holding (CMPH) will be a win-win for both parties. While CMA CGM  gets the necessary cash to lower its leverage, CMPH gains geographical footprint well aligned with China’s maritime silk route initiative. However, the deal has an accounting complication, which an analyst should consider while forecasting CMA CGM's debt obligation.

CMA CGM’s Latest Deal with CMPH (SEHK:0144) : A Win-Win for Everyone

<p>On YTD basis, the stock underperformed the broader index (-13.2% vs Drewry Port Index: -9.4%) and the P/E of 6.3x remained well below the industry peers (Cosco: 7.5x, DP World: 8.6x, ICTSI: 17.7x and GLPR: 6.6x). Suppressed P/E mainly reflects trade war-related uncertainties and increased concerns about CMPH’s leveraged acquisition strategy adversely affecting its ROIC profile. Offsetting these pressures, the company benefited from its higher geographic diversification, its strategic importance in Chinese BRI initiative and its possession of strategically important port assets. We do not foresee any material uptick unless the management prefers generating value from its recent acquisitions or something positive happens on the trade war front.</p>

On YTD basis, the stock underperformed the broader index (-13.2% vs Drewry Port Index: -9.4%) and the P/E of 6.3x remained well below the industry peers (Cosco: 7.5x, DP World: 8.6x, ICTSI: 17.7x and GLPR: 6.6x). Suppressed P/E mainly reflects trade war-related uncertainties and increased concerns about CMPH’s leveraged acquisition strategy adversely affecting its ROIC profile. Offsetting these pressures, the company benefited from its higher geographic diversification, its strategic importance in Chinese BRI initiative and its possession of strategically important port assets. We do not foresee any material uptick unless the management prefers generating value from its recent acquisitions or something positive happens on the trade war front.

China Merchants Ports Holding (SEHK: 0144):Trade Conflict Choking Growth and Valuations

HK/China Equity Long-Short

Osbert Tang, CFA

<p>Since the publication of our Insight <a href="https://www.smartkarma.com/insights/china-merchants-port-144-hk-attractive-stub-value-ex-sipg-600018-ch" target="_blank" data-smartkarma-citation="insights:30438" rel="noopener">China Merchants Port (144 HK): Attractive Stub Value Ex-SIPG (600018 CH)</a>, <a href="https://www.smartkarma.com/entities/china-merchants-port-holdings-company-ltd" target="_blank" data-smartkarma-citation="entities:15155:1" rel="noopener">China Merchants Port (144 HK)</a> has outperformed <a href="https://www.smartkarma.com/entities/shanghai-international-port-group-co-ltd" target="_blank" data-smartkarma-citation="entities:14806:1" rel="noopener">Shanghai International Port Group (600018 CH)</a> by an impressive 11.5ppt on the back of the pick-up in throughput momentum, in our view.</p><p>We expect CMPH to sustain its outperformance against SIPG on potential US-China trade deal, newsflow on M&amp;As, profitability improvement in new projects and Qianhai-Shekou Free Trade Zone development. In fact, even with the recent outperformance against SIPG, CMPH's stub valuation is still close to historical low levels.  </p>

Since the publication of our Insight China Merchants Port (144 HK): Attractive Stub Value Ex-SIPG (600018 CH), China Merchants Port (144 HK) has outperformed Shanghai International Port Group (600018 CH) by an impressive 11.5ppt on the back of the pick-up in throughput momentum, in our view.We expect CMPH to sustain its outperformance against SIPG on potential US-China trade deal, newsflow on M&amp;As, profitability improvement in new projects and Qianhai-Shekou Free Trade Zone development. In fact, even with the recent outperformance against SIPG, CMPH's stub valuation is still close to historical low levels.  

China Merchants Port (144 HK): Extending Outperformance Against SIPG (600018 CH)

Hong Kong

Shenzhen International Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides investment, construction, and operation of logistic infrastructure facilities, as well as offers value-added logistic services. Shenzhen International serves customers worldwide.

COSCO Shipping Ports Limited, through its subsidiaries, provides shipping container leasing services worldwide.  The Company also operates container terminals and provides container handling, storage, transportation and management services, as well as depot handling and stevedoring services.

COSCO SHIPPING International (Hong Kong) Co., Ltd. provides shipping related services. The Company offers shipping, logistics, shipbuilding and ship repair services, ship trading agency services, marine insurance brokerage services, marine equipment and spare parts, coating products, and marine fuel and other related shipping products. COSCO International serves clients around the world.

Yuexiu Transport Infrastructure Ltd., through its subsidiaries, invests in, develops, operates, and manages toll highways, expressways, and bridges in China.

Yuexiu Transport Infrastructure (1052 HK)

Tianjin Port Development Holdings Limited operates container terminals in China.  The company provides container handling operations, stacking and warehousing services and non-containerized cargo services.

China Infrastructure & Logistics Group Ltd. provides port operation services. The Company offers port and warehouse leasing, container handling, cargo handling, and other services. China Infrastructure & Logistics Group also provides logistics, supply chain management, property management, and other services.

China Infrastructure & Logistics Group  (1719 HK)

Cathay Pacific Airways Limited operates scheduled airline services. The Company also provides related services, including airline catering, aircraft handling, and engineering.

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.

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.

Kerry Logistics Network Limited provides logistics services in Asia and internationally. The Company offers integrated logistics services, as well as leases warehousing space in Hong Kong and provides international freight forwarding services.

Auckland International Airport Limited owns and operates the Auckland International Airport.  The Airport includes a single runway, an international terminal and two domestic terminals.  The Airport also has commercial facilities which includes airfreight operations, car rental services, commercial banking center and office buildings.

Qube Holdings Ltd. is a logistics company. The Group operates in divisions covering Automotive, Bulk and General Stevedoring, Landside Logistics and Strategic Development Assets.

Taiwan High Speed Rail Corporation operates the high speed railway system (HSR) in Taiwan, running 345 KM from Taipei to Kaohsiung.

Shandong Hi-speed Co Ltd. operates and maintains toll roads, bridges, tunnels, and other infrastructure facilities.  The Company operates the Jiqing Highway, the Taiqu Road, the Jinan-Huanghe Bridge, the Pingyin Bridge, and the Binzhou Bridge. Shandong Hi-speed also retails petroleum products.

Jiangsu Expressway Company Ltd. constructs, operates, manages and maintains expressways in China.  The Company also provides passenger transportation and other ancillary services along including fueling stations, restaurants, car maintenance and repair and advertising.

Atlas Arteria Limted operates as an infrastructure developer and operator. The Company constructs highways, roads, bridges, and tunnels. Atlas Arteria also collects toll. Atlas Arteria serves clients worldwide.

Qingdao Port International Co., Ltd. engages in providing a wide range of port related services, ranging from basic port services, such as stevedoring and  storage services, to ancillary and extended services such  as logistics service sand financing-related services.

Fraport AG Frankfurt Airport Services Worldwide offers airport services. The Company operates the Frankfurt-Main, the airport in Lima, Peru, and the international terminal in Antalya, Turkey. Fraport also provides services to domestic and international carriers including traffic, facility and terminal management, ground handling, and security.

Flughafen Zuerich AG operates the Zurich Airport.  The Company constructs, leases, and maintains airport structures and equipment.

Kobenhavns Lufthavne A/S (Copenhagen Airports A/S - CPH) owns and operates Kastrup, the international airport in Copenhagen, and Roskilde airport.  The Company provides traffic management, maintenance, and security services, as well as manages the Airport Shopping Center and airport projects.  Kobenhavns Lufthavne also has investments in airports in Mexico, England, and China.

China Merchants Holdings International Company Limited, through its subsidiaries and associated companies, operates container and cargo terminals, port transportation, and airport cargo handling.  The Company also manufactures containers, paint, and trailers as well as operates toll road, shipping, property, and dealing securities businesses.

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China Merchants Port (144 HK)

TRACKING TRAFFIC/Containers & Air Cargo: For Most Box Carriers, Profitability Likely Already Peaked

In H119, container shipping rates in the key Transpacific Eastbound tradelane held up well despite tepid demand, as fleet expansion in most of 2019...

Daniel Hellberg

StubWorld: The Rising Tide As China Merchants Port Recovers

A double-dose of StubWorld this week: Port operators, including China Merchants Port (144 HK) ("CMPH"), have rebounded from 2019 lows amidst a...

David Blennerhassett

CMA CGM’s Latest Deal with CMPH (SEHK:0144) : A Win-Win for Everyone

The recent deal between CMA CGM and China Merchant Port Holding (CMPH) will be a win-win for both parties. While CMA CGM gets the necessary cash...

Drewry Maritime Financial Research

China Merchants Ports Holding (SEHK: 0144):Trade Conflict Choking Growth and Valuations

On YTD basis, the stock underperformed the broader index (-13.2% vs Drewry Port Index: -9.4%) and the P/E of 6.3x remained well below the industry...

Drewry Maritime Financial Research

China Merchants Port (144 HK): Extending Outperformance Against SIPG (600018 CH)

Since the publication of our Insight China Merchants Port (144 HK): Attractive Stub Value Ex-SIPG (600018 CH), China Merchants Port (144 HK) has...

Osbert Tang, CFA

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