CMP's total container throughput increased 2.5% YoY in 2019, missing our expectation. Mainly due to the effect of disposal of SCW and slower growth rate of SIPG and oversea throughput against the background of poor import/export performance, CMP's 2019 container throughput growth decelerated from 2018. For bulk cargo, the disposal of SCW and business structure adjustment of SIPG were the main reasons for the negative growth rate at -10.5% YoY for CMP's total bulk cargo volume.
CMP's investment through Terminal Link is expected to enhance its global network of terminals. Terminal Link agreed to acquire ten terminals in various levels of shareholding from CMA Terminals for a total consideration of US$955,102,041. The acquisition is expected to bring incremental throughput to CMP with support from CMA CGM. To finance the proposed acquisition, the Company has proposed to subscribe mandatory convertible bonds issued by, and provide loans to, Terminal Link, but we do not expect higher leverage levels in light of CMP's plan to restructure terminals portfolio.
Reiterate "Accumulate" rating and set TP of HK$14.50. The coronavirus outbreak is expected to bring temporary disruption to production. At this stage, China and the U.S. has reached a phase one trade agreement. The concession regarding the additional tariff is likely to support trading between the two countries, thus CMP's throughput. In addition, trading amount with the EU and ASEAN stayed resilient, representing sustained growth potential for CMP. We still favor CMP's overseas development capability and expect valuation of CMP to recover to some extent. Our TP represents 6.0x, 10.7x and 9.7x 2019-2021 PER.