2018 results beat our expectation
CSP announced its 2018 results: Revenue rose +57.6% YoY toUS$1bn. Net profit attributable to shareholders declined -36.7% YoY（or rose 42.9% YoY after excluding one-off items in 2017） toUS$324.6mn, or US$0.10 per share, beat our expectation, driven byfast volume growth （+17% YoY, or +7.8% organically）。 Includinginterim dividend, full year payout ratio was 40%, implying 4.3%dividend yield.
Trends to watch
The strategy to achieve synergy with parentco and shipping allianceis paying off: after reorganization in 2016, CSP adopted a strategy toutilize its unique position of shipping-and-port synergy with itsparentco （COSCO Shipping Holdings, the third largest containershipping company in the world after acquisition of OOCL） and relatedshipping alliance. As a result, volume contribution of Ocean Allianceand parentco grew 33.7% YoY in 2018. As OOCL contributes only 3.3%of the company’s throughput in six major subsidiary terminals,management thinks there is further room for growth.
Management expects low double-digit volume growth in 2019,thanks to more port calls from Ocean Alliance and capacityexpansion. The company is looking for additional investments incertain terminals （such as capacity expansion from 3mn TEU per yearto 5mn TEU per year in Singapore PSA in 2018） or port groups tooptimize its global port network. The company may also divest somenon-performing assets to generate better returns for shareholders.
Earnings forecast
Due to lower administrative expenses and better than expectedvolume growth, we raise our 2019 earnings forecast by 12% toUS$354mn, and introduce 2020 earnings forecast at 383mn.
Valuation and recommendation
The stock is trading at 8.6x 2019e and 7.9x 2020e P/E. We maintainour BUY rating and HK$9.89 target price （11x 2019e P/E）， 30% upsidefrom the current price. Dividend yield may reach 4.7%/5.1% based onour earnings forecast and 40% payout ratio. Risks: Containerthroughput growth misses expectation; decreasing tariffs. .