HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>China's two national port companies <a href="https://www.smartkarma.com/entities/china-merchants-port-holdings-company-ltd" target="_blank" data-smartkarma-citation="entities:15155:1" rel="noopener">China Merchants Port (144 HK)</a> and <a href="https://www.smartkarma.com/entities/cosco-shipping-ports-ltd" target="_blank" data-smartkarma-citation="entities:360:1" rel="noopener">Cosco Shipping Ports (1199 HK)</a> have underperformed, but exports have picked up. We see an opportunity here.</li>
<li>With a 9.2% increase in container throughput, CSPL even down by 4.8% YTD, underperformed CMPH by 12.9pp. There is room for it to catch up.</li>
<li>CSPL is also cheaper at 7x and 6.3x PERs for the next two years, making it more attractive on a relative basis.</li>
</ul>


China's two national port companies China Merchants Port (144 HK) and Cosco Shipping Ports (1199 HK) have underperformed, but exports have picked up. We see an opportunity here.
With a 9.2% increase in container throughput, CSPL even down by 4.8% YTD, underperformed CMPH by 12.9pp. There is room for it to catch up.
CSPL is also cheaper at 7x and 6.3x PERs for the next two years, making it more attractive on a relative basis.


China Port Pair Opportunity: COSCO Shipping Ports Vs. China Merchants Port

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Xiamen International Port H / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/xiamen-international-port-h" target="_blank" data-smartkarma-citation="entities:5390:1" rel="noopener">Xiamen International Port H (3378 HK)</a>'s composite document is out with the H Shareholders’ class meeting scheduled for 16 September. The IFA considers the offer to be fair and reasonable. </li>
<li>The key conditions are approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders' rejection). There is no minimum acceptance condition.</li>
<li>This is a done deal. At last close and for a 6 October payment, the gross and annualised spread to the offer is 0.9% and 7.6%, respectively. </li>
</ul>



Xiamen International Port H (3378 HK)'s composite document is out with the H Shareholders’ class meeting scheduled for 16 September. The IFA considers the offer to be fair and reasonable. 
The key conditions are approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders' rejection). There is no minimum acceptance condition.
This is a done deal. At last close and for a 6 October payment, the gross and annualised spread to the offer is 0.9% and 7.6%, respectively. 


Xiamen Port’s H Share Class Meeting on 16 September

<ul>
<li>The pre-condition for <a href="https://www.smartkarma.com/entities/xiamen-international-port-h" target="_blank" data-smartkarma-citation="entities:5390:1" rel="noopener">Xiamen International Port H (3378 HK)</a>’s privatisation offer from Xiamen Port Holding is satisfied. The offer is HK$2.25 per H share. </li>
<li>The key conditions are approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders' rejection). There is no minimum acceptance condition.</li>
<li>The offer is attractive. At last close and for a 21 October payment, the gross and annualised spread to the offer is 2.7% and 16.0%, respectively.</li>
</ul>


The pre-condition for Xiamen International Port H (3378 HK)’s privatisation offer from Xiamen Port Holding is satisfied. The offer is HK$2.25 per H share. 
The key conditions are approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders' rejection). There is no minimum acceptance condition.
The offer is attractive. At last close and for a 21 October payment, the gross and annualised spread to the offer is 2.7% and 16.0%, respectively.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/xiamen-international-port-h" target="_blank" data-smartkarma-citation="entities:5390:1" rel="noopener">Xiamen International Port H (3378 HK)</a> announced a pre-conditional privatisation offer from Xiamen Port Holding at HK$2.25 per H share + final dividend of RMB0.021 per share (ex-div: 15 June). </li>
<li>The key conditions are approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders' rejection). There is no minimum acceptance condition.  </li>
<li>The offer is attractive in comparison to historical share prices and multiples. We think that the privatisation proposal will likely succeed. At the last close, the gross spread is 55.2%.</li>
</ul>



Xiamen International Port H (3378 HK) announced a pre-conditional privatisation offer from Xiamen Port Holding at HK$2.25 per H share + final dividend of RMB0.021 per share (ex-div: 15 June). 
The key conditions are approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders' rejection). There is no minimum acceptance condition.  
The offer is attractive in comparison to historical share prices and multiples. We think that the privatisation proposal will likely succeed. At the last close, the gross spread is 55.2%.


Xiamen Port’s Juicy HK$2.25 Per H Share Privatisation Offer

Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

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.

<p>The non-container segment is expected to grow further expanding 7.7% in revenues in 2019. In line with expected growth in the non-containerised segment, we believe net profit will increase by 8.5% in 2019. The company will keep dividends to 40% of its net profit in 2019. While the company is expected to continue consolidating in the aftermaths of tariff reduction in 2018,  escalation of the US-China trade conflict is a key risk to our 2019 outlook. Tianjin is expected to strengthen the feeder service in the Bohai Rim region and expand in the inland dry ports while proactively respond to change in the structure of the ore transportation business. Our DCF-derived fair value of HKD 1.14 implies a forward FY19e PE of 8.1x. Although Tianjin Port Development is cheaper than our DPI average, the underlying drivers justify the valuation discount. The operating margin of the trading business, at 2.2%, is near the breakeven point, while the tug boat business and non-containerised cargoes weigh on profitability. </p>

The non-container segment is expected to grow further expanding 7.7% in revenues in 2019. In line with expected growth in the non-containerised segment, we believe net profit will increase by 8.5% in 2019. The company will keep dividends to 40% of its net profit in 2019. While the company is expected to continue consolidating in the aftermaths of tariff reduction in 2018,  escalation of the US-China trade conflict is a key risk to our 2019 outlook. Tianjin is expected to strengthen the feeder service in the Bohai Rim region and expand in the inland dry ports while proactively respond to change in the structure of the ore transportation business. Our DCF-derived fair value of HKD 1.14 implies a forward FY19e PE of 8.1x. Although Tianjin Port Development is cheaper than our DPI average, the underlying drivers justify the valuation discount. The operating margin of the trading business, at 2.2%, is near the breakeven point, while the tug boat business and non-containerised cargoes weigh on profitability. 

Tianjin: Terminal Expansion Offers Insignificant Upside

Hong Kong

Tianjin Port Development Holdings Limited operates container terminals in China.  The company provides container handling operations, stacking and warehousing services and non-containerized cargo services.

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Tianjin Port (3382 HK)

China Port Pair Opportunity: COSCO Shipping Ports Vs. China Merchants Port

China's national port companies, CMPH and CSPL, have underperformed but with recovering throughput, there is an opportunity. CSPL is cheaper at 7x...

Osbert Tang, CFA

Xiamen Port’s Pre-Condition Satisfied

The pre-condition is satisfied. Interims are on 26 August. At last close and for a 21 October payment, the annualised spread to the offer is 16.0%....

Arun George

Tianjin: Terminal Expansion Offers Insignificant Upside

The non-container segment is expected to grow further expanding 7.7% in revenues in 2019. In line with expected growth in the non-containerised...

Drewry Maritime Financial Research

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52-week Range

Market Cap (USDm)

P/E

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China Port Pair Opportunity: COSCO Shipping Ports Vs. China Merchants Port

​China's national port companies, CMPH and CSPL, have underperformed but with recovering throughput, there is an opportunity. CSPL is cheaper at 7x...

Osbert Tang, CFA

Xiamen Port’s H Share Class Meeting on 16 September

This is a done deal. At the last close price of HK$2.23 per H Share and for a 6 October payment, the annualised spread to the offer is 7.6%.

Arun George

Xiamen Port’s Pre-Condition Satisfied

The pre-condition is satisfied. Interims are on 26 August. At last close and for a 21 October payment, the annualised spread to the offer is 16.0%....

Arun George

Xiamen Port’s Juicy HK$2.25 Per H Share Privatisation Offer

Xiamen Port Holding will offer HK$2.25 per H share + a final dividend of RMB0.021 per share. The offer is attractive in comparison to historical...

Arun George

Tianjin: Terminal Expansion Offers Insignificant Upside

The non-container segment is expected to grow further expanding 7.7% in revenues in 2019. In line with expected growth in the non-containerised...

Drewry Maritime Financial Research

China's national port companies, CMPH and CSPL, have underperformed but with recovering throughput, there is an opportunity. CSPL is cheaper at 7x...