FY15 revenue decreased by 17.2% yoy to US$999.8 million; net loss wasUS$66.3 million in FY15 while net profit was US$1.9 million in FY14.The loss during 2015 was mainly due to weak dry bulk shipping market in2015, especially in 2H15. Segment loss of dry bulk shipping was US$72.1million in FY15. Container shipping business was also weak but it was betterthan the dry bulk shipping business with segment profit of US$24.9 million.
Entering into 2016, the BDI decreased further and fluctuated around itshistorical low level. According to Clarkson, global dry bulk trade is expected togrow by 0.3% yoy in 2016, slightly better than -0.1% growth rate in 2015, but itwill be much lower than that of 4.7% in 2014, mainly due to the reduceddemand from China; meanwhile, global bulk carrier capacity is expected togrow by 2.0% yoy in 2016. As a result, overcapacity will continue to increasein 2016. We maintain the negative view on the BDI and spot market of drybulk shipping in 2016.
We think the new parent company (China Merchants Group) may inject moreassets into the Company in the future as the state-owned enterprise reformdeepens. However, the global dry bulk market is still under pressure and it willnot improve in the short term. We think the fundamentals of the Company willremain sluggish in the short term. Therefore, we downgrade the investmentrating to ‘Neutral’ and revise down TP to HK$1.40. Our TP represents 0.4xFY16 PBR.