Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

AP Moeller - Maersk A/S / Equity Bottom-Up

<ul>
<li>Maersk's Q1 earnings were solid, despite plummeting container rates and volumes. Annualizing Q1 Net Income would give RoE of about 17%, which is a healthy level, in our view. </li>
<li>Q1 EBITDA of US$4 bn is equivalent to 36% to 50% of full-year guidance, which remains unchanged. Maersk indicated Q1 will likely be its most profitable quarter in 2023.</li>
<li>Maersk's result reinforces our view that container rates are bottoming. A related takeaway is that a slowing goods inflation rate could lose a tailwind it's enjoyed since last October.</li>
</ul>


Maersk's Q1 earnings were solid, despite plummeting container rates and volumes. Annualizing Q1 Net Income would give RoE of about 17%, which is a healthy level, in our view. 
Q1 EBITDA of US$4 bn is equivalent to 36% to 50% of full-year guidance, which remains unchanged. Maersk indicated Q1 will likely be its most profitable quarter in 2023.
Maersk's result reinforces our view that container rates are bottoming. A related takeaway is that a slowing goods inflation rate could lose a tailwind it's enjoyed since last October.


Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)

<ul>
<li>Our measures of momentum and profitability suggest industry bottomed in Q1 2023</li>
<li>In addition, shares of container shipping stocks have stopped reacting to (plentiful) bad news</li>
<li>Outcome of ongoing rate negotiations and Q1 earnings calls will drive near-term performance</li>
</ul>


Our measures of momentum and profitability suggest industry bottomed in Q1 2023
In addition, shares of container shipping stocks have stopped reacting to (plentiful) bad news
Outcome of ongoing rate negotiations and Q1 earnings calls will drive near-term performance


TRACKING TRAFFIC/Container Shipping: Momentum Bottomed | Shares Stabilized | Focus on May News

<ul>
<li>After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123</li>
<li>We believe core profitability has also declined to pre-Covid levels for some carriers</li>
<li>
<a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> no longer looks expensive, trading at 70-75% of replacement  cost.</li>
</ul>


After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123
We believe core profitability has also declined to pre-Covid levels for some carriers

Evergreen Marine Corp (2603 TT) no longer looks expensive, trading at 70-75% of replacement  cost.


TRACKING TRAFFIC / Container Shipping: End of the Rollercoaster Ride

HK/China Equity Long-Short

Osbert Tang, CFA

Orient Overseas (International) / Equity Bottom-Up

<ul>
<li>While <a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">Orient Overseas International (316 HK)</a> will welcome its inclusion in Hang Seng Index, there is risk that it will follow the pattern that new inclusions performed badly post entry.</li>
<li>Globally, many container shipping stocks have retreated from their peaks in Mar this year, but OOIL is still hovering around its peak level, making is susceptible to a correction.</li>
<li>Challenging factors include softening sequential momentum, peaking out of spot rates, weaker demand picture, increase in supply pressure and declining earnings trend are weighing on the industry and the company.</li>
</ul>


While Orient Overseas International (316 HK) will welcome its inclusion in Hang Seng Index, there is risk that it will follow the pattern that new inclusions performed badly post entry.
Globally, many container shipping stocks have retreated from their peaks in Mar this year, but OOIL is still hovering around its peak level, making is susceptible to a correction.
Challenging factors include softening sequential momentum, peaking out of spot rates, weaker demand picture, increase in supply pressure and declining earnings trend are weighing on the industry and the company.


Orient Overseas Intl (316 HK): Cursed by Index Inclusion?

Equity Capital Markets

ZIM Integrated Shipping Services / Equity Capital Markets

ZIM Integrated Shipping Services (ZIM US)

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/499/original/BANNER-ECM.png?1611103790" class="editor-image img-responsive" data-smartkarma-image-id="183499"></figure></section><p>On the afternoon of January 19th, <a href="https://www.smartkarma.com/entities/zim-integrated-shipping-services-ltd" target="_blank" data-smartkarma-citation="entities:31124:1" rel="noopener">ZIM Integrated Shipping Services (ZIM US)</a> filed an updated prospectus, which includes preliminary 2020 financials and details of its planned IPO.</p><p>At the proposed US$16-19 per share IPO price range, ZIM appears reasonably price compared to peers <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> and <a href="https://www.smartkarma.com/entities/ap-moeller-maersk-a-s" target="_blank" data-smartkarma-citation="entities:22428:1" rel="noopener">AP Moeller - Maersk A/S (MAERSKB DC)</a>. The smaller of these comparables, mid-sized Taiwanese "pure play" Evergreen, may be a better comp for ZIM than industry giant Maersk, which also has significant non-container shipping revenues. </p><p>Current data suggest container shipping market conditions will remain strong in the near-term, but we believe some risks to that positive narrative are emerging. Chief among these risks are rising fuel costs and weaker-than-expected US retail sales. It may be that ZIM is pricing its IPO aggressively in order to quickly complete its listing before these risks become more tangible.</p><p>A bigger question is, do investors really want to increase exposure to the container shipping industry near the cycle's peak?</p>

On the afternoon of January 19th, ZIM Integrated Shipping Services (ZIM US) filed an updated prospectus, which includes preliminary 2020 financials and details of its planned IPO.At the proposed US$16-19 per share IPO price range, ZIM appears reasonably price compared to peers Evergreen Marine Corp (2603 TT) and AP Moeller - Maersk A/S (MAERSKB DC). The smaller of these comparables, mid-sized Taiwanese "pure play" Evergreen, may be a better comp for ZIM than industry giant Maersk, which also has significant non-container shipping revenues. Current data suggest container shipping market conditions will remain strong in the near-term, but we believe some risks to that positive narrative are emerging. Chief among these risks are rising fuel costs and weaker-than-expected US retail sales. It may be that ZIM is pricing its IPO aggressively in order to quickly complete its listing before these risks become more tangible.A bigger question is, do investors really want to increase exposure to the container shipping industry near the cycle's peak?

ZIM at IPO Price Range Looks Reasonable Vs Peers, But Should Investors Add Container Exposure Now?

Israel

ZIM Integrated Shipping Services Ltd provides shipping services. The Company offers multi-modal, cargo handling, tariff management, schedule information, and other related services. ZIM Integrated Shipping Services serves clients worldwide.

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ZIM Integrated Shipping Services (ZIM US)

Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)

Maersk's Q1 result showed a steep Y/Y decline in earnings due to lower rates. But RoE is fine, and the company maintained guidance, which supports...

Tracking Traffic

TRACKING TRAFFIC/Container Shipping: Momentum Bottomed | Shares Stabilized | Focus on May News

Container shipping industry momentum bottomed in Q1, and related shares have stopped reacting to bad news. News and commentary from industry...

Tracking Traffic

TRACKING TRAFFIC / Container Shipping: End of the Rollercoaster Ride

For container rates and profitability, it's been a wild rollercoaster ride over the past three years. But now shares of pure play Evergreen Marine...

Tracking Traffic

Orient Overseas Intl (316 HK): Cursed by Index Inclusion?

While news of HSI inclusion is positive, OOIL is now open to the pattern of post-entry weakness. It is facing more challenges and outperformance...

Osbert Tang, CFA

ZIM at IPO Price Range Looks Reasonable Vs Peers, But Should Investors Add Container Exposure Now?

ZIM at the mid-point of its IPO price range does not look expensive, but the bigger question is: why add container exposure near the peak of the...

Tracking Traffic

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