Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

On Friday <a href="https://www.smartkarma.com/entities/15428" target="_blank" data-smartkarma-citation="entities:15428:1">Evergreen Marine Corp Ltd (2603 TT)</a> reported February consolidated sales of NT$10.3 bn, up 5.4% Y/Y despite the shorter month (28 days vs. 29 in 2016's 'Leap Year'). In the first two months of 2017, Evergreen's consolidated sales are up 15.8% Y/Y, driven primarily by higher average container freight rates. Even modest, single-digit Y/Y sales growth in March should be sufficient to eliminate the large gross loss Evergreen reported in Q1 2016 (-9% gross margin). Rival <a href="https://www.smartkarma.com/entities/8502" target="_blank" data-smartkarma-citation="entities:8502:1">Yang Ming Marine</a>…

On Friday Evergreen Marine Corp Ltd (2603 TT) reported February consolidated sales of NT$10.3 bn, up 5.4% Y/Y despite the shorter month (28 days vs. 29 in 2016's 'Leap Year'). In the first two months of 2017, Evergreen's consolidated sales are up 15.8% Y/Y, driven primarily by higher average container freight rates. Even modest, single-digit Y/Y sales growth in March should be sufficient to eliminate the large gross loss Evergreen reported in Q1 2016 (-9% gross margin). Rival Yang Ming Marine…

Evergreen Marine Revenue Up 15.8% YTD, Enough to Generate Sharp Q1 2017 Turnaround

Institutional investors have long shied away from owning <a href="https://www.smartkarma.com/entities/15428" target="_blank" data-smartkarma-citation="entities:15428:1">Evergreen Marine Corp Ltd (2603 TT)</a> for two reasons unrelated to the container shipping sector's chronically weak earnings:<ol><li>Concerns about potential conflicts of interest between the Listco and its founding family</li><li>A Group structure that is perceived to be opaque or at least unnecessarily complex</li></ol>In this note we strive to show that investor concerns about potential conflicts and a lack of transparency are misplaced. We believe the interests of the Listco (Evergreen Marine Corp., or EMC) and its founding family are closely aligned, and EMC's earnings results seem to bear this out. Furthermore, a bit of digging shows that the basic Group structure is in fact quite uncomplicated, and the improvement in Taiwan's reporting standards over the years means that investors can obtain a clear picture of the EMC's financial status every quarter.We believe EMC is unjustifiably cheap relative to some of its closest Asian peers. At its current price, EMC presents an attractive way to play a recovery in the rapidly consolidating container shipping industry. We have set a target price of NT$16 per share and recommend investors buy EMC on dips.

Institutional investors have long shied away from owning Evergreen Marine Corp Ltd (2603 TT) for two reasons unrelated to the container shipping sector's chronically weak earnings:Concerns about potential conflicts of interest between the Listco and its founding familyA Group structure that is perceived to be opaque or at least unnecessarily complexIn this note we strive to show that investor concerns about potential conflicts and a lack of transparency are misplaced. We believe the interests of the Listco (Evergreen Marine Corp., or EMC) and its founding family are closely aligned, and EMC's earnings results seem to bear this out. Furthermore, a bit of digging shows that the basic Group structure is in fact quite uncomplicated, and the improvement in Taiwan's reporting standards over the years means that investors can obtain a clear picture of the EMC's financial status every quarter.We believe EMC is unjustifiably cheap relative to some of its closest Asian peers. At its current price, EMC presents an attractive way to play a recovery in the rapidly consolidating container shipping industry. We have set a target price of NT$16 per share and recommend investors buy EMC on dips. 

Evergreen Marine: Not Really So Complex After All, & Cheap on EV/Capacity

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.

Yang Ming Marine Transport / Equity Bottom-Up

Earlier last week, we highlighted YMM's debt burden with the company taking the slot left vacant by Hanjin Shipping, as the company with the most leveraged balance sheet in the industry. We had argued that YMM was an "apt candidate for a government bailout".  <a href="https://www.smartkarma.com/insights/dfrs-trading-idea-2017-2-yang-ming-marine-high-leverage-is-a-big-red-flag-and-a-great-concern" target="_blank">https://www.smartkarma.com/insights/dfrs-trading-idea-2017-2-yang-ming-marine-high-leverage-is-a-big-red-flag-and-a-great-concern</a>In a response to our report, YMM has now issued a customer advisory reiterating its financial recovery plan.Key…

Earlier last week, we highlighted YMM's debt burden with the company taking the slot left vacant by Hanjin Shipping, as the company with the most leveraged balance sheet in the industry. We had argued that YMM was an "apt candidate for a government bailout".  https://www.smartkarma.com/insights/dfrs-trading-idea-2017-2-yang-ming-marine-high-leverage-is-a-big-red-flag-and-a-great-concernIn a response to our report, YMM has now issued a customer advisory reiterating its financial recovery plan.Key…

DFRS Trading Idea 2017 #2 - Yang Ming Marine - High Leverage Is a Big Red Flag (Update 1)

DFRS Trading Idea 2017 #2 - Yang Ming Marine Transport Corp (2609 TT, Unattractive, NTD 3.5 ) - High leverage is a big red flag and a great concern“Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.” Nassim Nicholas Taleb, Ten principles for a Black Swan-proof world (2009). We used the above quote when Hanjin Shipping Co. said it will apply for court receivership. We do not…

DFRS Trading Idea 2017 #2 - Yang Ming Marine Transport Corp (2609 TT, Unattractive, NTD 3.5 ) - High leverage is a big red flag and a great concern“Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.” Nassim Nicholas Taleb, Ten principles for a Black Swan-proof world (2009). We used the above quote when Hanjin Shipping Co. said it will apply for court receivership. We do not…

DFRS Trading Idea 2017 #2 - Yang Ming Marine - High Leverage Is a Big Red Flag and a Great Concern

Orient Overseas International / Equity Bottom-Up

A series of announced mergers and acquisitions in the global container shipping industry will soon pare the industry down to six large global carriers, plus a handful of smaller global and regional carriers, and a very large number of mostly insignificant regional and niche carriers. Clearly, the sector’s long-overdue consolidation has gained momentum over the last six months, and despite a recent jump in spot rates, we believe the recent wave of deals will soon force a response from the remaining 'leftover' carriers, who must either act to quickly gain neede scale through financial combinations or find ways to reduce exposure to chronic overcapacity in long-haul container shipping segments.In this note we look at the strategic responses available to five different small- to mid-sized Asian container carriers, four of which are listed in Hong Kong and Taiwan. We lay out the criteria we use to evaluate potential transactions within the sector, and profile these five carriers -- their histories, strengths, and needs. Based on these criteria and our understanding of these five carriers’ needs, we then suggest a few potential combinations that seem to make the most strategic and financial sense.

A series of announced mergers and acquisitions in the global container shipping industry will soon pare the industry down to six large global carriers, plus a handful of smaller global and regional carriers, and a very large number of mostly insignificant regional and niche carriers. Clearly, the sector’s long-overdue consolidation has gained momentum over the last six months, and despite a recent jump in spot rates, we believe the recent wave of deals will soon force a response from the remaining 'leftover' carriers, who must either act to quickly gain neede scale through financial combinations or find ways to reduce exposure to chronic overcapacity in long-haul container shipping segments.In this note we look at the strategic responses available to five different small- to mid-sized Asian container carriers, four of which are listed in Hong Kong and Taiwan. We lay out the criteria we use to evaluate potential transactions within the sector, and profile these five carriers -- their histories, strengths, and needs. Based on these criteria and our understanding of these five carriers’ needs, we then suggest a few potential combinations that seem to make the most strategic and financial sense.

Surging Momentum of Consolidation Will Soon Force Response from Asia's 'Leftover' Container Carriers

Taiwan

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.

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Yang Ming Marine Transport (2609 TT)

Evergreen Marine Revenue Up 15.8% YTD, Enough to Generate Sharp Q1 2017 Turnaround

On Friday Evergreen Marine Corp Ltd (2603 TT) reported February consolidated sales of NT$10.3 bn, up 5.4% Y/Y despite the shorter month (28 days...

Daniel Hellberg

Evergreen Marine: Not Really So Complex After All, & Cheap on EV/Capacity

Institutional investors have long shied away from owning Evergreen Marine Corp Ltd (2603 TT) for two reasons unrelated to the container shipping...

Daniel Hellberg

DFRS Trading Idea 2017 #2 - Yang Ming Marine - High Leverage Is a Big Red Flag (Update 1)

Earlier last week, we highlighted YMM's debt burden with the company taking the slot left vacant by Hanjin Shipping, as the company with the most...

Drewry Maritime Financial Research

DFRS Trading Idea 2017 #2 - Yang Ming Marine - High Leverage Is a Big Red Flag and a Great Concern

DFRS Trading Idea 2017 #2 - Yang Ming Marine Transport Corp (2609 TT, Unattractive, NTD 3.5 ) - High leverage is a big red flag and a great...

Drewry Maritime Financial Research

Surging Momentum of Consolidation Will Soon Force Response from Asia's 'Leftover' Container Carriers

A series of announced mergers and acquisitions in the global container shipping industry will soon pare the industry down to six large global...

Daniel Hellberg

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