Global Credit Insights

Sebastian Ashton, CFA

SAA Advisors

Credit

CMA CGM is the largest container shipping company in France and the third largest shipping group in the world. The company's main services include shipping, fleet management, logistics and hazardous cargo solutions.In FY 2017 the company reported revenue and EBITDA of $21,116m and $2,117m respectively and net leverage of 3.3x vs. an enterprise valuation (EV/EBITDA) multiple of c. 8.0x.Given the cyclical nature of the industry, the volatility of bunker fuel prices and the interest rate sensitivity of the high yield bonds, we would wait for a more attractive entry level into this investment opportunity.However; we believe that the company can continue to deleverage and create additional equity value that should help the bonds ‘pull to par’ over time.Our investment thesis is underpinned by the assumption that the company can partially mitigate rising bunker fuel costs and deleverage over time.

CMA CGM is the largest container shipping company in France and the third largest shipping group in the world. The company's main services include shipping, fleet management, logistics and hazardous cargo solutions.In FY 2017 the company reported revenue and EBITDA of $21,116m and $2,117m respectively and net leverage of 3.3x vs. an enterprise valuation (EV/EBITDA) multiple of c. 8.0x.Given the cyclical nature of the industry, the volatility of bunker fuel prices and the interest rate sensitivity of the high yield bonds, we would wait for a more attractive entry level into this investment opportunity.However; we believe that the company can continue to deleverage and create additional equity value that should help the bonds ‘pull to par’ over time.Our investment thesis is underpinned by the assumption that the company can partially mitigate rising bunker fuel costs and deleverage over time.

CMA CGM (Global Container Shipping Company) - Initiation of Coverage - Part 1 of 4

Lead Analyst, Credit Research, Drewry Maritime Financial Research

Konstantinos Oikonomopoulos

Lead Analyst, Credit Research

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.

Higher bunker prices more than offset higher realised freight rates: Bunker expenses, which account for 15% of total operating expenses, spiked by 32% year-on-year in the first quarter of 2018, driving total operating expenses of the group up by 23% for the same period. All of CMA CGM’s cost components headed north and in line with the volume growth. Revenues grew by 17% year-on-year in the first quarter of 2018 at USD 5.4bn (benefitted from a 15% surge in transported volumes for the same period…

Higher bunker prices more than offset higher realised freight rates: Bunker expenses, which account for 15% of total operating expenses, spiked by 32% year-on-year in the first quarter of 2018, driving total operating expenses of the group up by 23% for the same period. All of CMA CGM’s cost components headed north and in line with the volume growth. Revenues grew by 17% year-on-year in the first quarter of 2018 at USD 5.4bn (benefitted from a 15% surge in transported volumes for the same period…

CMA CGM Credit Research 1Q18 Results Update - Credit Outlook Stable - Yields on the Rise

Strong profitability thanks to an improved market, NOL's contribution and Ocean Alliance network efficiencies  Record revenues in FY17: Top line surged by 32% y/y at the end of the year at USD 21bn of which USD 5.9bn were contributed by NOL. On a stand-alone basis and in order to compare accurately performance (NOL consolidation since June 2016), CMA CGM’s sales grew by circa 14% on FY17 revenue of USD 15.2bn vs USD 13.4bn a year before. The consolidated group benefitted from a 21% surge y/y…

Strong profitability thanks to an improved market, NOL's contribution and Ocean Alliance network efficiencies  Record revenues in FY17: Top line surged by 32% y/y at the end of the year at USD 21bn of which USD 5.9bn were contributed by NOL. On a stand-alone basis and in order to compare accurately performance (NOL consolidation since June 2016), CMA CGM’s sales grew by circa 14% on FY17 revenue of USD 15.2bn vs USD 13.4bn a year before. The consolidated group benefitted from a 21% surge y/y…

Container Shipping - Can CMA CGMs Bonds Withstand the Selling Pressure from the Broader Bond Market?

Credit positives<ul>
<li>S&amp;P upgraded CMA CGM by one notch to B+ on 10 Oct 2017. This was predicted by Drewry on 21 Sep when we published a note analysing the reasons we believe the company is set for a credit rating upgrade.</li>
<li>CMA CGM transported 11% greater volumes y/y in 3Q17 outperforming global throughput growth thanks to a good market environment additional capacity within Ocean Alliance. The group also achieved 13% higher rates per teu for the first 9M17 versus 9M16 at USD 1,098.9 per teu.</li>
<li>Credit…</li>
</ul>

Credit positives
S&amp;P upgraded CMA CGM by one notch to B+ on 10 Oct 2017. This was predicted by Drewry on 21 Sep when we published a note analysing the reasons we believe the company is set for a credit rating upgrade.
CMA CGM transported 11% greater volumes y/y in 3Q17 outperforming global throughput growth thanks to a good market environment additional capacity within Ocean Alliance. The group also achieved 13% higher rates per teu for the first 9M17 versus 9M16 at USD 1,098.9 per teu.
Credit…


CMA CGM Credit Research - Container Shipping

<ul><li>
Hapag-Lloyd (HL) group's performance for the first nine months of 2017 was dominated by the consolidation of UASC for the first time: The group reported significant growth in transported volumes, thanks to UASC's teu contribution, which in conjunction with higher freight rates (although UASC realised lower rates, +2.2% on 9M17 y/y), led to EUR 9.5bn revenues for the last 12 months at end-3Q17, 21% compared to the FY16 figure. The UASC integration led to cost savings that were partly offset by…</li></ul>


Hapag-Lloyd (HL) group's performance for the first nine months of 2017 was dominated by the consolidation of UASC for the first time: The group reported significant growth in transported volumes, thanks to UASC's teu contribution, which in conjunction with higher freight rates (although UASC realised lower rates, +2.2% on 9M17 y/y), led to EUR 9.5bn revenues for the last 12 months at end-3Q17, 21% compared to the FY16 figure. The UASC integration led to cost savings that were partly offset by…

France

CMA CGM provides shipping services. The Company offers vessel and container fleet management, freight delivery, logistics, cargo cruises, and other transportation services. CMA CGM serves customers worldwide.

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CMA CGM SA (144898Z FP)

CMA CGM (Global Container Shipping Company) - Initiation of Coverage - Part 1 of 4

CMA CGM is the largest container shipping company in France and the third largest shipping group in the world. The company's main services include...

Sebastian Ashton, CFA

CMA CGM Credit Research 1Q18 Results Update - Credit Outlook Stable - Yields on the Rise

Higher bunker prices more than offset higher realised freight rates: Bunker expenses, which account for 15% of total operating expenses, spiked by...

Drewry Maritime Financial Research

Container Shipping - Can CMA CGMs Bonds Withstand the Selling Pressure from the Broader Bond Market?

Strong profitability thanks to an improved market, NOL's contribution and Ocean Alliance network efficiencies Record revenues in FY17: Top line...

Drewry Maritime Financial Research

CMA CGM Credit Research - Container Shipping

Credit positives S&P upgraded CMA CGM by one notch to B+ on 10 Oct 2017. This was predicted by Drewry on 21 Sep when we published a note...

Drewry Maritime Financial Research

DMFR - Credit Research - Hapag-Lloyd AG

Hapag-Lloyd (HL) group's performance for the first nine months of 2017 was dominated by the consolidation of UASC for the first time: The group...

Drewry Maritime Financial Research

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