HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Cosco Shipping Energy Transportation Co. Ltd. (H) / Equity Bottom-Up

Cosco Shipping Energy Transportation Co. Ltd. (H)

<ul>
<li>The market consensus is too conservative for <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation Co. (1138 HK)</a>. A better-than-expected 3Q25 result is likely to prompt an earnings upgrade.   </li>
<li>Spot VLCC rate is 32.7% higher than 1H25 so far for 2H25, and average bunker price has declined 6.2% in 3Q25, both implying improved earnings prospects.</li>
<li>With an average ROE for FY25-27 at over 12%, its 1.05x P/B is not stretched. During FY20-23, the average ROE of 1.6% has supported a P/B ratio of 0.56x. </li>
</ul>


The market consensus is too conservative for Cosco Shipping Energy Transportation Co. (1138 HK). A better-than-expected 3Q25 result is likely to prompt an earnings upgrade.   
Spot VLCC rate is 32.7% higher than 1H25 so far for 2H25, and average bunker price has declined 6.2% in 3Q25, both implying improved earnings prospects.
With an average ROE for FY25-27 at over 12%, its 1.05x P/B is not stretched. During FY20-23, the average ROE of 1.6% has supported a P/B ratio of 0.56x. 


COSCO Shipping Energy (1138 HK): Preparing for Upside Surprise

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation (1138 HK)</a> will benefit from the oil supply worry as Israel and Iran are unlikely to reach a "real" peace agreement in the short term. </li>
<li>The worry, or actual, closure of Hormuz will raise VLCC rates by escalating reserve building, increasing demand for alternative routes, a higher risk premium, and panic chartering.</li>
<li>After yesterday's retreat, CSET trades on an undemanding 5.8x PER and 8.8% yield for FY25F. With over 12% ROE, its 0.73x P/B is cheap, below the average since 2023. </li>
</ul>



Cosco Shipping Energy Transportation (1138 HK) will benefit from the oil supply worry as Israel and Iran are unlikely to reach a "real" peace agreement in the short term. 
The worry, or actual, closure of Hormuz will raise VLCC rates by escalating reserve building, increasing demand for alternative routes, a higher risk premium, and panic chartering.
After yesterday's retreat, CSET trades on an undemanding 5.8x PER and 8.8% yield for FY25F. With over 12% ROE, its 0.73x P/B is cheap, below the average since 2023. 


COSCO Shipping Energy (1138 HK): A Viable Play on the Israel-Iran Conflict

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

<ul>
<li>The whole sector has been derated as the oil prices collapsed</li>
<li>The capital cycle story is still intact and gets stronger as time passes</li>
<li>There is a margin of safety in the current valuations</li>
</ul>


The whole sector has been derated as the oil prices collapsed
The capital cycle story is still intact and gets stronger as time passes
There is a margin of safety in the current valuations


Opportunities in Tankers (1138.HK) As the Sector Has Discounted Most of the Issues Facing It

<ul>
<li>The P/B multiple of <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation (H) (1138 HK)</a> has pulled back to 0.8x now, from 1.3x three months ago. The risk-reward payoff has improved.</li>
<li>Historically, there is no long-term correlation between oil prices and share prices. Hence, we should not be overfocused on the recent pullback in oil prices.</li>
<li>Although the market consensus is high, FY24 should still see growth. The 3Q24 VLCC spot rate is 27.4% higher YoY, potentially boosting quarterly results and sustaining a high FY24 yield. </li>
</ul>


The P/B multiple of Cosco Shipping Energy Transportation (H) (1138 HK) has pulled back to 0.8x now, from 1.3x three months ago. The risk-reward payoff has improved.
Historically, there is no long-term correlation between oil prices and share prices. Hence, we should not be overfocused on the recent pullback in oil prices.
Although the market consensus is high, FY24 should still see growth. The 3Q24 VLCC spot rate is 27.4% higher YoY, potentially boosting quarterly results and sustaining a high FY24 yield. 


COSCO Shipping Energy (1138 HK): Better Safety Margin Now

<ul>
<li>The 20% retreat in the share price of <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation (1138 HK)</a> from the peak has well reflected the plunge in 3Q23 VLCC rates and 10% earnings downgrade.</li>
<li>4Q23 VLCC rates have rebounded 78.4% QoQ. Re-routing due to recent Houthi attacks on commercial ships at the Red Sea has reduced effective supply and is positive to rates.</li>
<li>Heightened energy security needs will drive demand. The medium-term supply pressure is mild as the VLCC orderbook equals just 2% of the existing fleet, fueling ROE for FY23-25F. </li>
</ul>


The 20% retreat in the share price of Cosco Shipping Energy Transportation (1138 HK) from the peak has well reflected the plunge in 3Q23 VLCC rates and 10% earnings downgrade.
4Q23 VLCC rates have rebounded 78.4% QoQ. Re-routing due to recent Houthi attacks on commercial ships at the Red Sea has reduced effective supply and is positive to rates.
Heightened energy security needs will drive demand. The medium-term supply pressure is mild as the VLCC orderbook equals just 2% of the existing fleet, fueling ROE for FY23-25F. 


COSCO Shipping Energy (1138 HK): Time for Another Look

China

COSCO SHIPPING Energy Transportation Co., Ltd. offers marine shipping services. The Company provides refined oil transportation, crude oil transportation, and other services. COSCO SHIPPING Energy Transportation also ships iron ores, dry bulks, coal, and other products.

Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK)

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Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK)

COSCO Shipping Energy (1138 HK): Preparing for Upside Surprise

Market consensus is too conservative for CSET. Better-than-expected 3Q25 results likely to prompt earnings upgrade with higher spot VLCC rates and...

Osbert Tang, CFA

COSCO Shipping Energy (1138 HK): A Viable Play on the Israel-Iran Conflict

CSET is poised to benefit from oil supply worries amid Israel-Iran tensions. A closure of Hormuz will raise rates by increasing alternative route...

Osbert Tang, CFA

Opportunities in Tankers (1138.HK) As the Sector Has Discounted Most of the Issues Facing It

The current negative narrative around the sector of higher oil production, lessening of sanctions and an upcoming recession provides an opportunity

Rikki Malik

COSCO Shipping Energy (1138 HK): Better Safety Margin Now

COSCO Shipping Energy issued a positive profit alert indicating net profit for FY24 at Rmb3.96bn, a 17.2% YoY increase. More importantly, the 4Q24...

Osbert Tang, CFA

COSCO Shipping Energy (1138 HK): Time for Another Look

The Red Sea crisis will continue to bode well for tanker demand as well as negatively impact capacity supply. CSET has rallied 25% from its recent...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

COSCO Shipping Energy (1138 HK): Preparing for Upside Surprise

​Market consensus is too conservative for CSET. Better-than-expected 3Q25 results likely to prompt earnings upgrade with higher spot VLCC rates and...

Osbert Tang, CFA

COSCO Shipping Energy (1138 HK): A Viable Play on the Israel-Iran Conflict

​CSET is poised to benefit from oil supply worries amid Israel-Iran tensions. A closure of Hormuz will raise rates by increasing alternative route...

Osbert Tang, CFA

Opportunities in Tankers (1138.HK) As the Sector Has Discounted Most of the Issues Facing It

The current negative narrative around the sector of higher oil production, lessening of sanctions and an upcoming recession provides an opportunity

Rikki Malik

COSCO Shipping Energy (1138 HK): Better Safety Margin Now

COSCO Shipping Energy issued a positive profit alert indicating net profit for FY24 at Rmb3.96bn, a 17.2% YoY increase. More importantly, the 4Q24...

Osbert Tang, CFA

COSCO Shipping Energy (1138 HK): Time for Another Look

The Red Sea crisis will continue to bode well for tanker demand as well as negatively impact capacity supply. CSET has rallied 25% from its recent...

Osbert Tang, CFA

Market consensus is too conservative for CSET. Better-than-expected 3Q25 results likely to prompt earnings upgrade with higher spot VLCC rates and...

CSET is poised to benefit from oil supply worries amid Israel-Iran tensions. A closure of Hormuz will raise rates by increasing alternative route...