HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>A "Long <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC Intl (1308 HK)</a>, Short <a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">OOIL (316 HK)</a>" pair trade should benefit from the more resilient intra-Asia trade and capture the tariff-induced challenges on Trans-Pacific trade. </li>
<li>OOIL derived 28.3% of its volume and 38.7% of its revenue from the Trans-Pacific route in 1Q25. Instead, SITC generated 100% of its revenue from the Asian market.</li>
<li>While OOIL's 0.7x P/B is cheaper than SITC's 2.5x, its FY25 ROE of 10.6% is lower than SITC's 34.6%. SITC's dividend yield is also trending up, against OOIL's down.</li>
</ul>


A "Long SITC Intl (1308 HK), Short OOIL (316 HK)" pair trade should benefit from the more resilient intra-Asia trade and capture the tariff-induced challenges on Trans-Pacific trade. 
OOIL derived 28.3% of its volume and 38.7% of its revenue from the Trans-Pacific route in 1Q25. Instead, SITC generated 100% of its revenue from the Asian market.
While OOIL's 0.7x P/B is cheaper than SITC's 2.5x, its FY25 ROE of 10.6% is lower than SITC's 34.6%. SITC's dividend yield is also trending up, against OOIL's down.


China Pair Trade: Long SITC Intl (1308 HK), Short OOIL (316 HK)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sitc-international-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a>'s 1H26 net profit grew 7.4% despite a challenging environment. Its interim dividend payout ratio increased by 5.2pp as net cash surged. </li>
<li>The outlook remains decent as fuel, charter and port handling charges elevate freight rates. So far in 2H26, China-SE Asia and China-Korea freight rates are higher YoY. </li>
<li>The market is underestimating the 2H26 earnings, implying upgrade potential. Its 12.3x PER and 5.4x P/B are undemanding given high ROE and net cash on hand.</li>
</ul>



SITC International (1308 HK)'s 1H26 net profit grew 7.4% despite a challenging environment. Its interim dividend payout ratio increased by 5.2pp as net cash surged. 
The outlook remains decent as fuel, charter and port handling charges elevate freight rates. So far in 2H26, China-SE Asia and China-Korea freight rates are higher YoY. 
The market is underestimating the 2H26 earnings, implying upgrade potential. Its 12.3x PER and 5.4x P/B are undemanding given high ROE and net cash on hand.


SITC International (1308 HK): The Stock to Place Your Bets On

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<ul>
 <li>
Leading Intra-Asia Specialist: SITC is a dominant player in the intra-Asia container shipping market, leveraging a high-frequency, high-density network to provide reliable and efficient logistics solutions. This focus on a niche, high-growth market insulates it from the volatility of major east-west trade lanes.</li>
 <li>
Resilient &amp; Profitable Business Model: The company has a track record of profitability even during industry downturns, thanks to its focus on direct, long-lasting customer relationships and a cost-efficient, uniform fleet of smaller vessels. This strategy yields high utilization rates and strong margins.</li>
 <li>
Strong Financials &amp; Shareholder Returns: SITC maintains a robust balance sheet with low leverage and has a consistent history of returning capital to shareholders through high dividend payouts, supported by strong operating cash flow generation.</li>
</ul>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.


  
Leading Intra-Asia Specialist: SITC is a dominant player in the intra-Asia container shipping market, leveraging a high-frequency, high-density network to provide reliable and efficient logistics solutions. This focus on a niche, high-growth market insulates it from the volatility of major east-west trade lanes.
  
Resilient &amp; Profitable Business Model: The company has a track record of profitability even during industry downturns, thanks to its focus on direct, long-lasting customer relationships and a cost-efficient, uniform fleet of smaller vessels. This strategy yields high utilization rates and strong margins.
  
Strong Financials &amp; Shareholder Returns: SITC maintains a robust balance sheet with low leverage and has a consistent history of returning capital to shareholders through high dividend payouts, supported by strong operating cash flow generation.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

Primer: SITC International (1308 HK) - Aug 2026

<ul>
<li>The 1H25 net profit of US$630m (+79.7% YoY) for <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> is impressive. It maintains a generous 70% payout ratio, yielding 4.8% for the interim.</li>
<li>Its outlook for 2H25 stays positive despite the recent pull-back in spot rates. Overall demand-supply dynamics continue to be favourable in the short and medium term.</li>
<li>With interim earnings already accounting for 58% of full-year consensus, there is room for an upgrade. At 3.3x P/B, it is not expensive given 30-40% ROEs. </li>
</ul>


The 1H25 net profit of US$630m (+79.7% YoY) for SITC International (1308 HK) is impressive. It maintains a generous 70% payout ratio, yielding 4.8% for the interim.
Its outlook for 2H25 stays positive despite the recent pull-back in spot rates. Overall demand-supply dynamics continue to be favourable in the short and medium term.
With interim earnings already accounting for 58% of full-year consensus, there is room for an upgrade. At 3.3x P/B, it is not expensive given 30-40% ROEs. 


SITC International (1308 HK): A Charming 1H25

Thematic (Sector/Industry)

<ul>
<li>With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp. </li>
<li>
<a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> and <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> are expected to sustain strengths into 2025 on market value management and pick-up in new orders.</li>
<li>
<a href="https://www.smartkarma.com/entities/xinhua-winshare-publishing-media-co-ltd" target="_blank" data-smartkarma-citation="entities:15072:1" rel="noopener">Xinhua Winshare (811 HK)</a>, <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a>, and <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> may hold their share price, but gains are unlikely to be as much as 2024.</li>
</ul>


With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp. 

China Communications Construction (1800 HK) and Dongfang Electric (1072 HK) are expected to sustain strengths into 2025 on market value management and pick-up in new orders.

Xinhua Winshare (811 HK), China Everbright Environment (257 HK), and SITC International (1308 HK) may hold their share price, but gains are unlikely to be as much as 2024.


Our Best Calls in 2024: Review and Outlook for 2025

Hong Kong

SITC International Holdings Co., Ltd. is a leading shipping logistics company in the intra-Asia area. It provides integrated transportation and logistics solutions, including container liner shipping, freight forwarding, shipping agency, and warehousing services. The company was founded in 1991 and is headquartered in Hong Kong.

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SITC International (1308 HK)

China Pair Trade: Long SITC Intl (1308 HK), Short OOIL (316 HK)

There is a clear divergence between SITC's and OOIL's 1Q25 operating performance. SITC's revenue grew 38.6%, driven by a 6.8% volume growth and a...

Osbert Tang, CFA