1H15 revenue decreased by 19.4% yoy to US$485 million, net loss was US$18.3 million in 1H15 while net profit was US$2.3 million in 1H14. The net loss was mainly due to particularly weak dry bulk shipping market in 1H15. Meanwhile, the performance of container shipping segment, which accounted for 48.8% of revenue, was stable and stronger than dry bulk shipping.
Dry bulk market performance is expected to be better in 2H15 than 1H15.We expect that the global demand for dry bulks like iron ore and coal will be weak as China’s economic growth slows down. However, demolition capacity of dry bulk vessels is at a historical high in 2015. We think the supply-demand imbalance and profit margin of dry bulk shipping will improve starting in 2H16while market performance is expected to be better in 2H15 than in 1H15. On the other hand, the Company’s container shipping business, which focuses on intra-Asia routes, is expected to remain stable with low growth.
Maintain investment rating of ‘Accumulate’ and TP of HK$2.40. The asset injections in mid 2014 enlarged the business scale of the Company and enhanced synergy effect, which will benefit the Company when the market recovers. On the other hand, the parent company may inject more assets into the Company in the future as the state-owned enterprise reform deepens. Considering the long-term positive outlook brought by asset injections, we maintain investment rating of ‘Accumulate’ and maintain TP of HK$2.40. Our TP represents 46.2x and 19.9x FY16-FY17 PER and 0.6x FY15 PBR.