London: Drewry Maritime Equity Research has initiated coverage on the global container liners’ sector with three major Asian container lines: Orient Overseas (OOIL), Neptune Orient Lines (NOL) and China Shipping Container Lines (CSCL).
“OOIL ticks all the boxes of a quality company which should be investors’ preferred play in what still is a challenging industry environment,” Drewry noted.
“Driven by a strong management focus on achieving higher yields and cost optimisation, OOIL has delivered sustained profitability and has been consistent in generating higher ROE than its sector peers,” the London firm continued, adding: “OOIL’s valuations are seen as attractive and sustained profitability deserves a premium.”
Drewry’s fair value for OOIL is HK$58 implying a 20% upside.
CSCL shares, meanwhile, carry an “undemanding” valuation and are currently trading near the bottom of their recent trading range, Drewry said. Drewry sees CSCL as a risky play, expecting the company’s core business to remain unprofitable this year. Drewry believe that CSCL’s higher-than-industry-average exposure to spot markets in key long haul trades is the “real nemesis” for the company. “CSCL will underperform most of its peers and thus warrants a cautious view,” the analysts predicted. Drewry’s fair value for CSCL is HK$2.24 implying a 23% upside. [20/06/13]
