The company just issued a positive profit alert. Based on preliminary results,the company expects to record a net profit of RMB520m in 2012 (vs. a net lossof RMB2,743m in 2011). The profit, according to the company, was mainlyattributable to: 1) the improvement of container shipping market in 2012.During the period, volume increased and rates recovered gradually; 2)company’s correct prediction of the market trend, hence implementedeffective measures to maximize efficiency of trade lanes; 3) disposal of selfownedcontainer boxes at relatively high second-hand market prices.
DB view:
We were not surprised to see this positive profit warning and in fact the netprofit number is also quite close to our estimate of RMB578m, which is thehighest on the street. While Bloomberg consensus is still looking for a full yearnet loss of RMB250m, we think most investors have already well anticipatedthat the company will turn around in 2012 after its disposal of container boxeslate last year.
Having said that, we think the magnitude of the profit should still exceedinvestors’ expectations. The company posted a net loss of RMB290m for9M12. The disposal gain of its container boxes was slightly above RMB900m.The whole year net profit of RMB520m means that excluding box disposalgain, the company only made a small loss around RMB100m in 4Q. Thisshould be much better than most investors had expected, based on ourunderstanding.We remain positive on container shipping. The peak shipments ahead ofChinese New Year (CNY) have surprised on the upside. This along withcarriers’ supply discipline has helped to lift average loading rates to above 90%for both Asia-Europe and Transpacific routes lately. Thanks to solid loadingrates, the previous rate hikes have been held up well. While Asia-Europe rates,after rebounding 40% since Dec last year, consolidated a bit this week (-4.5%wow), Transpacific rates rose another 7.6% wow this week. Given the strongvolume prior to CNY, carriers are planning another round of rate hike in earlyFeb. We would continue to buy container shipping names. CSCL remains ourtop buy idea in the space. Target price of HK$3.3 is based on 1.1x P/B.