Results Review
　　1Q19 results miss expectations due to one-off items
COSCO Shipping Ports announced 1Q19 results. Revenue rose 4% YoYto US$247.7mn. Net profit attributable to shareholders declined27.9% YoY to US$49.9mn （US$0.02/share）， dragged by two one-offitems: a US$22.55mn loss recognized due to dilution effect fromQingdao Port International’s A-share IPO, and a US$2.9mn losscaused by adoption of HKIFRS16 regarding lease. Adjusted net profitexcluding these items increased 8.9% YoY to US$75.4mn, largely inline with our expectation of 10% YoY growth.
　　The company’s total throughput grew 5.6% YoY, up 13.5% YoY at itssubsidiaries and 3.7% at its non-controlled terminals. We believe thisindicates continuing synergy between controlled terminals, theparentco’s shipping fleet, and its shipping alliances. By region,overseas throughput （+13% YoY） continued outgrowing Greater China（+3.6% YoY）， with southeast China the weakest （-0.8% YoY）。
　　Trends to watch
　　The company maintains its guidance on total throughput for 2019（low double-digit growth）， thanks to thanks to more port calls fromOcean Alliance and capacity expansion in Abu Dhabi and Singapore.
　　The company will also adopt industry-leading systems （Navis N4） toimproving operating efficiency and expand into terminal-relatedlogistics businesses （such as warehousing）。 The company aims toimprove its ROE to enhance profitability, so we suggest watching forpotential benefit from the disposal of non-performing assets.
　　Earnings forecast
　　We maintain our 2019 and 2020 earnings forecasts at US$354mn andUS$383mn, implying 9.1% and 8.3% YoY growth.
　　Valuation and recommendation
　　The stock is trading at 9.6x 2019e and 8.9x 2020e P/E. We maintainour BUY rating and HK$9.89 target price, offering 16% upside.
　　Dividend yields may reach 4.2% and 4.5% in 2019 and 2020, based onour 40% payout ratio assumption.
　　Risks
　　Container throughput growth misses expectation; tariffs decrease.