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Asian shipping
Containerships under pressure
Event
Following a year of record – or close to record – profits for most containership
operators in 2010, the industry has lurched back into loss, with the lone
exception in Asia being Macquarie’s top pick, Orient Overseas (OOIL). The
industry has faced a lose-lose situation – order ultra-large containerships
(ULCS) in order to compete on long-haul routes like Asia-Europe, but do so at
the risk of adding to what appears to be an emerging over-supply situation. A
number of operators, especially in Europe, are stretched financially to pay for
their new vessels, and we believe this could eventually enable Asian
operators to take market share.
Impact
Whither rates? After the global financial crisis and the sharp deterioration in
trade volumes in 2009, the containership industry pulled itself out of deep loss
with effective supply management. It was thought they had “learned their
lesson”. In 2011, however, an influx of capacity has led to a rate war. We look
at the outlook for a recovery in rates.
Balancing the order book: At US$100–150m apiece, ULCS are not cheap,
especially when you need a string of 10 to operate on the Asia-Europe trade
lanes. Somehow the industry has scrapped together all its spare change and
as can be seen in the side-bar, ordered a lot of ULCS. The question is, can
the industry absorb all these new behemoths?
Taking share: Asian operators have moved up the ranks, but the three
biggest operators of containerships are European, and command 40% market
share. We look at whether they can be knocked down.
Outlook
Global jitters precipitated by the European debt crisis and a flagging US
economy have combined with fears of a Chinese slowdown and contributed to
very weak performance among the Asian containership operators for most of
2011. The market has not discriminated between operators making money
and those with mounting losses.
We believe Orient Overseas offers excellent value on just 0.6x P/BV, and it is
our top pick. It has remained profitable in its core operations unlike any other
global operator in Asia.
We have upgraded CSCL to Outperform as the P/BV of 0.5x is below its
peers. We believe it has minimised losses by focusing more on domestic
Chinese business and chartering out excess tonnage.
In Taiwan Corrine Jian has downgraded Yang Ming (2609 TT, NT$16.10, TP
NT$13.50) to Underperform and Wan Hai (2615 TT, NT$14.05, TP NT$15.00)
to Neutral following disappointing 1H earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asian shipping
Containerships under pressure
Event
Following a year of record – or close to record – profits for most containership
operators in 2010, the industry has lurched back into loss, with the lone
exception in Asia being Macquarie’s top pick, Orient Overseas (OOIL). The
industry has faced a lose-lose situation – order ultra-large containerships
(ULCS) in order to compete on long-haul routes like Asia-Europe, but do so at
the risk of adding to what appears to be an emerging over-supply situation. A
number of operators, especially in Europe, are stretched financially to pay for
their new vessels, and we believe this could eventually enable Asian
operators to take market share.
Impact
Whither rates? After the global financial crisis and the sharp deterioration in
trade volumes in 2009, the containership industry pulled itself out of deep loss
with effective supply management. It was thought they had “learned their
lesson”. In 2011, however, an influx of capacity has led to a rate war. We look
at the outlook for a recovery in rates.
Balancing the order book: At US$100–150m apiece, ULCS are not cheap,
especially when you need a string of 10 to operate on the Asia-Europe trade
lanes. Somehow the industry has scrapped together all its spare change and
as can be seen in the side-bar, ordered a lot of ULCS. The question is, can
the industry absorb all these new behemoths?
Taking share: Asian operators have moved up the ranks, but the three
biggest operators of containerships are European, and command 40% market
share. We look at whether they can be knocked down.
Outlook
Global jitters precipitated by the European debt crisis and a flagging US
economy have combined with fears of a Chinese slowdown and contributed to
very weak performance among the Asian containership operators for most of
2011. The market has not discriminated between operators making money
and those with mounting losses.
We believe Orient Overseas offers excellent value on just 0.6x P/BV, and it is
our top pick. It has remained profitable in its core operations unlike any other
global operator in Asia.
We have upgraded CSCL to Outperform as the P/BV of 0.5x is below its
peers. We believe it has minimised losses by focusing more on domestic
Chinese business and chartering out excess tonnage.
In Taiwan Corrine Jian has downgraded Yang Ming (2609 TT, NT$16.10, TP
NT$13.50) to Underperform and Wan Hai (2615 TT, NT$14.05, TP NT$15.00)
to Neutral following disappointing 1H earnings.
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