Macquarie :Asia Shipping Pulse- Confirming recent trends

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Asia Shipping Pulse
Confirming recent trends
Event
 We hosted a number of shipping companies at the Macquarie APAC
Infrastructure and Transportation Conference in Singapore 9-10
December, including Nippon Yusen (NYK), Neptune Orient Lines (NOL),
Sinotrans, U-Ming and Precious Shipping (PSL). We also hosted shipyards
Yangzijiang Shipbuilding (YZJ SP, NR) and Cosco (COS SP, NR). On 8
December we led a tour of the shipyards of Keppel (KEP SP, NR) and
SembCorp (SCI SP, NR).

 Containership rates continue to soften, but several shipping companies have
announced rate increases from January 2011 and volumes remain at a high
level.
Impact
 Confirming recent trends: For the most part, the companies confirmed
trends we have highlighted recently, including a deteriorating outlook for dry
bulk, cautious optimism on containerships. Financing and over-capacity
remain challenges for the shipyards; the outlook for offshore vessels such as
jack-ups has improved markedly in recent months.
 Dry bulk market weakens: Both U-Ming and PSL expressed the view that
the dry bulk market is likely to deteriorate over the next couple of years due to
the overhang of capacity. They are well positioned with low-cost bases and
are looking to pick up vessels at a discount. Forward rates for both Capesize
and Panamax continue to slide; Capesize are now flirting with loss-making
levels for some operators.
 Containership volumes hold up: NOL and NYK both confirmed that
containership volumes continue to remain robust. As a result, there has been
limited withdrawal of capacity from the market. Although rates have continued
to slide, they are still at levels where most operators are profitable.
Outlook
 We believe there is little opportunity for good news for the dry bulk side of
things in the near term. Our top picks among dry bulk operators – China
Shipping Development, Sinotrans and Precious Shipping – share
attractive valuations, a defensive business model and solid management –
but they are unlikely to remain immune to broader industry trends in the near
term.
 The risk remains on the upside for containership operators. Our top picks are
Orient Overseas and Hanjin. Further potential upside to the outlook for US
economic growth, especially lower unemployment and increased personal
consumption, would improve the earnings outlook for NOL. If the supplydemand balance of new vessels becomes more supportive of stable to
improved shipping rates, CSCL has the most upside leverage.