HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Pacific Basin Shipping / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pacific-basin-shipping-ltd" target="_blank" data-smartkarma-citation="entities:929:1" rel="noopener">Pacific Basin Shipping (2343 HK)</a> stays positive towards the outlook of the bulk shipping market despite the Russia-Ukraine war, higher inflation and lockdowns in China.</li>
<li>1Q22 coverage rates are 117% and 122% higher YoY for its Handysize and Supramax fleet, resepctively, and coverage for 2Q22 is also promising, securing good 1H22 earnings.</li>
<li>We expect it to turn into net cash by end-FY22, and even with such strong financial position, it will still generate over 30% ROE for the next two years.</li>
</ul>



Pacific Basin Shipping (2343 HK) stays positive towards the outlook of the bulk shipping market despite the Russia-Ukraine war, higher inflation and lockdowns in China.
1Q22 coverage rates are 117% and 122% higher YoY for its Handysize and Supramax fleet, resepctively, and coverage for 2Q22 is also promising, securing good 1H22 earnings.
We expect it to turn into net cash by end-FY22, and even with such strong financial position, it will still generate over 30% ROE for the next two years.


Pacific Basin (2343 HK): Optimistic Outlook Reaffirmed

<ul>
<li>Impressive result with underlying net profit reached US$698m in FY21, up sharply from loss of US$19.4m a year ago. Net gearing dropped to 7% with record-high ROE of 58%. </li>
<li>With 48-64% of Handysize and Supramax days covered at TCE slightly below FY21 level, it has well secured FY22 profitability, with upside from higher rate in rest of this year.</li>
<li>We expect ROE to be over 30% for FY22, making its 1.3x P/B not expensive, especially with an improved balance sheet. Dividend yield of 14% for FY22 is another attraction.</li>
</ul>


Impressive result with underlying net profit reached US$698m in FY21, up sharply from loss of US$19.4m a year ago. Net gearing dropped to 7% with record-high ROE of 58%. 
With 48-64% of Handysize and Supramax days covered at TCE slightly below FY21 level, it has well secured FY22 profitability, with upside from higher rate in rest of this year.
We expect ROE to be over 30% for FY22, making its 1.3x P/B not expensive, especially with an improved balance sheet. Dividend yield of 14% for FY22 is another attraction.


Pacific Basin Shipping (2343 HK): Strongest Ever Year

The 3Q21 trading update for <a href="https://www.smartkarma.com/entities/pacific-basin-shipping-ltd" target="_blank" data-smartkarma-citation="entities:929:1" rel="noopener">Pacific Basin Shipping (2343 HK)</a> painted a positive picture for the earnings performance for 2H21 and FY22. There is good QoQ improvement in time-charter equivalents for its Handysize and Supramax fleet in 3Q21, which are 69.3% and 98.6%, respectively, higher than 1H21. On such basis, we estimate that its 3Q21 profit may be some 33% more than 1H21, blowing away market consensus by sizeable margin.Additionally, the growth in minor bulk trade, particularly construction materials, cement and clinker and grains, has underpinned good Handysize and Supramax demand. The supply pressure is also light as net fleet growth is expected to be 3% and 1.8% for FY21 and FY22, respectively. We also think Pacific Basin may take opportunistic disposals of vessel to capture the favourable capital value movements. All in all, we think that having retreated 25% from the peak, the stock has returned to more attractive valuation multiples.

The 3Q21 trading update for Pacific Basin Shipping (2343 HK) painted a positive picture for the earnings performance for 2H21 and FY22. There is good QoQ improvement in time-charter equivalents for its Handysize and Supramax fleet in 3Q21, which are 69.3% and 98.6%, respectively, higher than 1H21. On such basis, we estimate that its 3Q21 profit may be some 33% more than 1H21, blowing away market consensus by sizeable margin.Additionally, the growth in minor bulk trade, particularly construction materials, cement and clinker and grains, has underpinned good Handysize and Supramax demand. The supply pressure is also light as net fleet growth is expected to be 3% and 1.8% for FY21 and FY22, respectively. We also think Pacific Basin may take opportunistic disposals of vessel to capture the favourable capital value movements. All in all, we think that having retreated 25% from the peak, the stock has returned to more attractive valuation multiples.

Pacific Basin Shipping (2343 HK): Stellar 2H21 in the Making

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.

While Handysize vessels withstood the test of time as TCE earnings dipped only 3.0% (USD 280pd) to USD 9,080pd, Supramaxes faced the real punch as earnings dropped by 7.6% (USD 850pd) to USD 10,400pd in 1Q19 y/y. Cargoes for small carriers have been majorly impacted due to the distressed soybean trade led by the US-China trade dispute and indirect import restrictions on Australian coal at Chinese ports. Weakness in the first quarter will impact the 1H19 result but we expect a better 2H19 result as freight rates have picked up.

While Handysize vessels withstood the test of time as TCE earnings dipped only 3.0% (USD 280pd) to USD 9,080pd, Supramaxes faced the real punch as earnings dropped by 7.6% (USD 850pd) to USD 10,400pd in 1Q19 y/y. Cargoes for small carriers have been majorly impacted due to the distressed soybean trade led by the US-China trade dispute and indirect import restrictions on Australian coal at Chinese ports. Weakness in the first quarter will impact the 1H19 result but we expect a better 2H19 result as freight rates have picked up.

Pacific Basin (2343 HK): Small Is the New Forerunner

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

CSSC (Hong Kong) Shipping Co Ltd / Equity Capital Markets

CSSC (HK) Shipping, the ship leasing company under one of the world's largest shipyard CSSC (China State Shipbuilding Corp), is said to be pre-marketing its USD 300 to 500 million IPO. In this insight, we will discuss the following topics:
<ul>
<li>The company's business segments</li>
<li>The company's assets</li>
<li>The industry backdrop</li>
<li>Financial snapshot and highlights</li>
<li>Our thoughts on valuation</li>
</ul>

CSSC (HK) Shipping, the ship leasing company under one of the world's largest shipyard CSSC (China State Shipbuilding Corp), is said to be pre-marketing its USD 300 to 500 million IPO. In this insight, we will discuss the following topics:

The company's business segments
The company's assets
The industry backdrop
Financial snapshot and highlights
Our thoughts on valuation


CSSC (HK) Shipping IPO: A Cyclical Business Masked as an Income Stock

Hong Kong

Pacific Basin Shipping Limited, through its subsidiaries, provides marine transportation services and logistical support to its customers through the commercial operation of a large, modern, and uniformly-sized fleet of shallow-draft Handysize dry bulk carriers.

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Pacific Basin Shipping (2343 HK)

Pacific Basin (2343 HK): Optimistic Outlook Reaffirmed

Pacific Basin is seeing another promising year in FY22, and has already covered most of 1H22 revenue days at sharply higher rates. It will turn...

Osbert Tang, CFA