HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

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> sits on decent yields of 12% for FY24 and 9.6% for FY25. Its net cash (66.2% of the share price) can support such dividends.</li>
<li>Despite the retreat from the recent peak, the spot freight rates are 9.7% and 145% higher than 1H24 and 2H23 respectively, pointing to better 2H24 earnings.</li>
<li>Operationally, it recorded the first YoY realised rate increase in 2Q24 after 6 quarters of consecutive decline. Its load factor also grew 2.3pp YoY in the quarter.</li>
</ul>



Orient Overseas International (316 HK) sits on decent yields of 12% for FY24 and 9.6% for FY25. Its net cash (66.2% of the share price) can support such dividends.
Despite the retreat from the recent peak, the spot freight rates are 9.7% and 145% higher than 1H24 and 2H23 respectively, pointing to better 2H24 earnings.
Operationally, it recorded the first YoY realised rate increase in 2Q24 after 6 quarters of consecutive decline. Its load factor also grew 2.3pp YoY in the quarter.


Orient Overseas Intl (316 HK): Don't Overlook Its Yield, Backed by Net Cash

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 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

<ul>
<li>The Shanghai Containerised Freight Index has popped by 25% in the first two weeks of 2024 due to the Red Sea crisis. <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> is a beneficiary.</li>
<li>There are already signs of bottoming out of realised freight rate and load factor in 4Q23. The spike in freight rate means that consensus forecasts are too bearish. </li>
<li>OOIL's net cash of US$5.6bn equals 58% of its market capitalisation, making its 0.7x P/B and 8% yield attractive. There is also a possibility for a higher dividend payout. </li>
</ul>


The Shanghai Containerised Freight Index has popped by 25% in the first two weeks of 2024 due to the Red Sea crisis. Orient Overseas International (316 HK) is a beneficiary.
There are already signs of bottoming out of realised freight rate and load factor in 4Q23. The spike in freight rate means that consensus forecasts are too bearish. 
OOIL's net cash of US$5.6bn equals 58% of its market capitalisation, making its 0.7x P/B and 8% yield attractive. There is also a possibility for a higher dividend payout. 


Orient Overseas Intl (316 HK): Is It Time for a Reversal?

<ul>
<li>Our index suggests long-haul rates remained stable in May as carriers approach peak season</li>
<li>Cleanup of West Coast slowdown, lower fuel prices should both serve as Summer tailwinds</li>
<li>We believe conditions could improve in H2 2023, and shares remain cheap on Price / Assets</li>
</ul>


Our index suggests long-haul rates remained stable in May as carriers approach peak season
Cleanup of West Coast slowdown, lower fuel prices should both serve as Summer tailwinds
We believe conditions could improve in H2 2023, and shares remain cheap on Price / Assets


Monthly Container Shipping Tracker | Rates Stable | Strike Averted | Fuel Prices Lower  (June 2023)

China

COSCO SHIPPING Holdings Co., Ltd. offers shipping services. The Company provides container shipping, terminal operation, bulk shipping, and container leasing services. COSCO SHIPPING Holdings conducts businesses worldwide.

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COSCO SHIPPING Holdings (601919 CH)

Orient Overseas Intl (316 HK): Don't Overlook Its Yield, Backed by Net Cash

Supported by net cash, OOIL offers attractive yields of 12% and 9.6% for FY24 and FY25. Improving operational performance points to a positive 2H24...

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

Orient Overseas Intl (316 HK): Is It Time for a Reversal?

SCFI surged 25% due to the Red Sea crisis, benefiting OOIL, suggesting consensus forecasts are too bearish. It is attractive at 0.7x P/B and 8%...

Osbert Tang, CFA

Monthly Container Shipping Tracker | Rates Stable | Strike Averted | Fuel Prices Lower (June 2023)

We are gaining conviction in our view that market conditions have bottomed for long-haul carriers, and that their shares appear depressed compared...

Tracking Traffic

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Orient Overseas Intl (316 HK): Don't Overlook Its Yield, Backed by Net Cash

Supported by net cash, OOIL offers attractive yields of 12% and 9.6% for FY24 and FY25. Improving operational performance points to a positive 2H24...

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

Orient Overseas Intl (316 HK): Is It Time for a Reversal?

​SCFI surged 25% due to the Red Sea crisis, benefiting OOIL, suggesting consensus forecasts are too bearish. It is attractive at 0.7x P/B and 8%...

Osbert Tang, CFA

Monthly Container Shipping Tracker | Rates Stable | Strike Averted | Fuel Prices Lower (June 2023)

We are gaining conviction in our view that market conditions have bottomed for long-haul carriers, and that their shares appear depressed compared...

Tracking Traffic

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

SCFI surged 25% due to the Red Sea crisis, benefiting OOIL, suggesting consensus forecasts are too bearish. It is attractive at 0.7x P/B and 8%...