HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Cosco Shipping Energy Transportation Co. Ltd. (H) / Equity Bottom-Up

Cosco Shipping Energy Transportation Co. Ltd. (H)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation (1138 HK)</a> has rallied sharply on strong earnings recovery, but this is too excessive. We think unrealistic expectation has been built on 2H23 earnings.</li>
<li>Over the last three months, the spot VLCC rate has collapsed by 90%, indicating a weakened demand outlook. The resilient share price has clearly not yet factored in this movement. </li>
<li>The recent surge in crude oil is driven by supply, not demand, factors. This has led to a 14% increase in bunker price which will heighten CSET's fuel bill.  </li>
</ul>



Cosco Shipping Energy Transportation (1138 HK) has rallied sharply on strong earnings recovery, but this is too excessive. We think unrealistic expectation has been built on 2H23 earnings.
Over the last three months, the spot VLCC rate has collapsed by 90%, indicating a weakened demand outlook. The resilient share price has clearly not yet factored in this movement. 
The recent surge in crude oil is driven by supply, not demand, factors. This has led to a 14% increase in bunker price which will heighten CSET's fuel bill.  


COSCO Shipping Energy (1138 HK): Clearly Over-Optimistic

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation (1138 HK)</a> rallied 12.5% in the last two trading days after issuing a FY22 positive profit alert, but we are concerned that momentum is peaking. </li>
<li>Its P/B of 0.92x is 4SD above average since 2016, more than sufficient to reflect rebound in FY23-24F profitability. Meanwhile, VLCC rate has plunged 80% in the last 3 months.  </li>
<li>We believe CSET is already midway in the upcycle which normally lasts for 2-3 years. With high 4Q22 profit difficult to sustain for long, there is downside risk on earnings.  </li>
</ul>



Cosco Shipping Energy Transportation (1138 HK) rallied 12.5% in the last two trading days after issuing a FY22 positive profit alert, but we are concerned that momentum is peaking. 
Its P/B of 0.92x is 4SD above average since 2016, more than sufficient to reflect rebound in FY23-24F profitability. Meanwhile, VLCC rate has plunged 80% in the last 3 months.  
We believe CSET is already midway in the upcycle which normally lasts for 2-3 years. With high 4Q22 profit difficult to sustain for long, there is downside risk on earnings.  


COSCO Shipping Energy (1138 HK): Beware of Momentum Peaking

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>There is a chance for a correction in the HK markets as latecomers to the party get nervous</li>
<li>All the signs are pointing to a continuation of this bull market as government support measures continue to roll out.</li>
<li>Don’t get bucked off that bull by a short-term correction!</li>
</ul>


There is a chance for a correction in the HK markets as latecomers to the party get nervous
All the signs are pointing to a continuation of this bull market as government support measures continue to roll out.
Don’t get bucked off that bull by a short-term correction!


Thematic (Sector/Industry)

<ul>
<li>Continued tailwinds for oil tanker stocks with tight markets keeping rates high</li>
<li>The copper supply and demand story is becoming more widely known and speculative interest is rising</li>
<li>Oil corrects  as the geopolitical premium subsides,but the longer-term story remains intact</li>
</ul>


Continued tailwinds for oil tanker stocks with tight markets keeping rates high
The copper supply and demand story is becoming more widely known and speculative interest is rising
Oil corrects  as the geopolitical premium subsides,but the longer-term story remains intact


Update on Some of the HK Commodity Stocks We Follow

<ul>
<li>China’s economic data is continuing to surprise on the upside.</li>
<li>Investors are starting to take notice and good news is not being ignored – a sign of a change in sentiment.</li>
<li>Economically sensitive and commodity-related sectors a good hunting ground for absolute returns</li>
</ul>


China’s economic data is continuing to surprise on the upside.
Investors are starting to take notice and good news is not being ignored – a sign of a change in sentiment.
Economically sensitive and commodity-related sectors a good hunting ground for absolute returns


What's up with Hong Kong? Bull Market Dude!

China

Cosco Shipping Specialised Carriers Co. provides marine and coastal freight transportation services.  The Company also operates in wholesale and retail trading, acts as a shipping agency, as well as provides loading and unloading, storage, and labor services.

Cosco Shipping Specialised Carriers  (600428 CH)

Cosco Shipping Development Co., Ltd is a container shipping company based in China.  The Company owns, charters, and operates container vessels for the provision of international and domestic container marine transportation services.

Hainan Strait Shipping Co., Ltd. offers domestic coastal passenger and cargo marine transportation services.

Bohai Ferry Company Limited is a passenger liner transportation enterprise. The Company mainly operates passenger vessel transport for the Yantai-Dalian and Penglai-Dalian sea routes.

Ningbo Marine Co., Ltd. provides freight transportation on the inland waters, as well as between the ports of Ningbo and Southeast Asian countries and Japan. The Company also invests in the transportation facility construction business and processes steel product.

Tianjin Tianhai Investment Co., Ltd. provides marine transportation services in China and internationally. The company operates container transportation and related business. Its principal routes include international container regular freight transportation lines to South Korea and Southeast Asia with Tianjin, Qingdao, Quanzhou, and Shantou as the base ports, as well as domestic freight transportation lines to Yingkou, Qingdao, Rizhao, and Longkou with Quanzhou and Shantou as the base ports. The company was formerly known as Tianjin Marine Shipping Co., Ltd. and changed its name to Tianjin Tianhai Investment Co., Ltd. in July 2015. Tianjin Tianhai Investment Co., Ltd. is based in Tianjin, China.

Lanhai Medical Investment Co., Ltd. provides domestic and international water transportation for bulk cargos.  The Company also trades petrochemical products and provides storage service.

Lanhai Medical Investment Co.,  (600896 CH)

China Southern Airlines Company Limited provides commercial airline services throughout China, Southeast Asia and other parts of the world.  The Company also provides other airline related services including aircraft maintenance and air catering.

China Eastern Airlines Corporation Limited, together with its subsidiaries, operates in the civil aviation industry. It offers passenger, cargo, mail delivery, ground, cargo handling, and other extended transportation services.

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.

Matson Inc., is involved in transportation and logistics.  The Company offers provides  multimodal transportation services to the North American market, including domestic and international rail intermodal service, long haul and regional highway brokerage, supply chain services and LTL transportation services, as well as third-party logistics services.

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.

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.

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.

Golden Ocean Group Limited operates as an international dry bulk shipping company based in Bermuda. The Company mainly operates in the Capesize and Panamax market segments. Golden Ocean Group's fleet is managed by Golden Ocean Group Management (Bermuda) Limited.

Star Bulk Carriers Corp. is a holding company, which engages in the marine transportation of dry bulk vessels. It ships iron ore, coal, grain, bauxite, fertilizers, and steel products. The company was founded by Petros Alexandros Pappas on December 13, 2006 and is headquartered in Athens, Greece.

Wallenius Wilhelmsen ASA provides shipping and logistics services. The Company offers ocean transportation for cars, trucks, buses, rolling equipment, and breakbulk cargo, as well as supply chain services. Wallenius Wilhelmsen serves agricultural, automotive, and aviation industries 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.

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)

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

COSCO Shipping Energy (1138 HK): Clearly Over-Optimistic

CSET's rally is excessive as the market has built up unrealistic expectations on 2H23 earnings. A weakened demand outlook and higher fuel cost...

Osbert Tang, CFA

COSCO Shipping Energy (1138 HK): Beware of Momentum Peaking

CSET's stretched P/B of 0.92x (4SD above average) has well reflected expectation of strong profit recovery. With VLCC rate collapsed in the last 3...

Osbert Tang, CFA

Don’t Let the Bull Throw You Off!

HK markets may see a correction due to nervous latecomers, but signs point to a continued bull market with government support measures in place...

Rikki Malik

Update on Some of the HK Commodity Stocks We Follow

Revisiting some of the Hong Kong commodity stocks we have highlighted previously. Tanker rates remain high, copper demand grows amid speculation,...

Rikki Malik

What's up with Hong Kong? Bull Market Dude!

China's stronger economic data is catching investors' attention, signalling a shift in sentiment and highlighting opportunities in economically...

Rikki Malik

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

COSCO Shipping Energy (1138 HK): Clearly Over-Optimistic

​CSET's rally is excessive as the market has built up unrealistic expectations on 2H23 earnings. A weakened demand outlook and higher fuel cost...

Osbert Tang, CFA

COSCO Shipping Energy (1138 HK): Beware of Momentum Peaking

CSET's stretched P/B of 0.92x (4SD above average) has well reflected expectation of strong profit recovery. With VLCC rate collapsed in the last 3...

Osbert Tang, CFA

Don’t Let the Bull Throw You Off!

​HK markets may see a correction due to nervous latecomers, but signs point to a continued bull market with government support measures in place...

Rikki Malik

Update on Some of the HK Commodity Stocks We Follow

Revisiting some of the Hong Kong commodity stocks we have highlighted previously. ​Tanker rates remain high, copper demand grows amid speculation,...

Rikki Malik

What's up with Hong Kong? Bull Market Dude!

​China's stronger economic data is catching investors' attention, signalling a shift in sentiment and highlighting opportunities in economically...

Rikki Malik

CSET's rally is excessive as the market has built up unrealistic expectations on 2H23 earnings. A weakened demand outlook and higher fuel cost...

HK markets may see a correction due to nervous latecomers, but signs point to a continued bull market with government support measures in place...

Revisiting some of the Hong Kong commodity stocks we have highlighted previously. Tanker rates remain high, copper demand grows amid speculation,...

China's stronger economic data is catching investors' attention, signalling a shift in sentiment and highlighting opportunities in economically...