REGIONALDRYBULKSHIPPING：HEADINGINTOSEASONALLYSOFTER1Q1212

1、buybuybuydeutsche bankmarkets researchasiahong kongtransportationmarineindustryregional dry bulkshippingdate12 december 2012industry updatesky hong, cfajoe liew, cfaheading into seasonally softer 1q1q weakness in rates should be seen as accumulation opportunitywe expect 1q seasonal weakness in dry b

2、ulk shipping rates and this may havea short term impact on stock prices. however, we think that would be anaccumulation opportunity because we continue to expect a more favourabledry bulk shipping environment in 2013 (versus 2012) and this should drivebetter earnings. stocks are still not expensive.

3、 our top buy is china shippingdevelopment because it is trading at a compelling 0.5x p/b. pacific basin is oursecond choice as we think they manage the dry bulk business well.in six out of the last eight years, 1q average bdi is lower than 4q1q decline in rates are caused by chinese new year shutdow

4、ns in asia andresearch analyst research analyst(+852) 2203 6198 (+852) 2203 top pickspacific basin shipping ltd(2343.hk),hkd4.35china shipping dvlpmt(1138.hk),hkd4.10companies featuredpacific basin shipping ltd(2343.hk),hkd4.352011a 2012e 2013eweather issues related to iron and coal exporting centre

5、s (eg australia). we donot expect any difference in 1q 2013. a recovery in rates should follow assupply growth becomes less of an issue.p/e (x)ev/ebitda (x)price/book (x)13.90.8supply response to low rate environment continues to be encouragingwe continue to believe that supply g

6、rowth in the dry bulk shipping sector willstx pan ocean (028670.ks),krw3,255.00 buy2011a 2012e 2013edrop materially in 2013 and this will be a key reason the operating environmentwill be more favourable in 2013. vessel demolition this year will end up beingaround 5% and newbuild orders were down 55%

7、 y/y ytd nov2012.p/e (x)ev/ebitda (x)price/book (x)32.315.00.3signs of demand recoverywe have seen chinese iron ore and coal imports pickup over the last twomonths. capesize charter rates are also off lows in september. railwayinfrastructure spending in china has moved up. china nov 2012

8、ip grew10.1% y/y compared with 9.6% y/y in oct. we expect china gdp growthrecovery over coming quarters.china shipping dvlpmt(1138.hk),hkd4.10p/e (x)ev/ebitda (x)price/book (x)buy2011a 2012e 2013e19.0 25.314.6 35.2 15.30.6 0.5 0.5china shipping development top buywith the 42% move up in the bdi sinc

9、e end sep, dry bulk shipping companiesshould register better 4q results (versus 3q). stocks have started to move butvaluations still look attractive. csd remains our top buy as quarterly earningsimprove. 4q earnings should be better than 3q because of a recovery in tankerrates. our second choice is

10、pacific basin as we like its strategy of buyingassets in a downcycle. purchase of cheap vessels will be a catalyst for thestock. stx pan ocean is the cheapest stock on a p/b basis but we think this isbecause of its high net gearing of close to 200%. any move by the company toreduce this debt level w

11、ill be taken positively by the market. this is a higherrisk investment proposition and hence potential returns are higher too.figure 1: dry bulk shipping valuation comparisonchina cosco hldgs (1919.hk),hkd3.69 buy2011a 2012e 2013ep/e (x) 27.3ev/ebitda (x) 30.0price/book (x) 0.9 1.1 1.1companytickerr

12、eccurr.tpprice%p/bv (x)roe(%)11dec upside 2012e 2013e 2012e 2013epacific basin2343.hkbuyhkd4.774.3510%0.840.82 -13.64.9stx pan ocean 028670.ksbuykrw6,5003,255 100%0.350.35 -17.51.2china cosco1919.hkbuyhkd3.903.696%1.131.08 -25.54.1china shipp.dev 1138.hkbuyhkd5.004.1022%0.490.48-2.11.9source: deutsc

13、he bank, company, bloomberg finance lp_deutsche bank ag/hong kongdeutsche bank does and seeks to do business with companies covered in its research reports. thus, investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. investors should

14、consider this report as only a single factor in making their investment decision. disclosures and analystcertifications are located in appendix 1. mica(p) 072/04/2012.2003200420052006200720082009201020112012f 2013f2012f 2013f 2014fytdnov122000 200120022003 200420052006 2007200820092010 20112001 2002

15、 2003 2004 2005 2006 2007 2008 2009 2010 2011ytdnov12jun-08sep-08dec-08mar-09jun-09sep-09dec-09mar-10jun-10sep-10dec-10mar-11jun-11sep-11dec-11mar-12jun-12sep-12q108 q208 q308 q408 q109 q209 q309 q409 q110 q210 q310 q410 q1113q11 q411 1q12 2q12q2113q122014f200320042005200620072008200920102011-12 dec

16、ember 2012marineregional dry bulk shippingdry bulk shipping in chartsfigure 2: dry bulk shipping supply materially declinesover the next two yearsfigure 3: dry bulk shipping demand. hard landing inchina not expected8007006005004003002001000total bulk fleet (mn dwt, lhs)18%16%14%12%10%8%6%4%2%0%y/y g

17、rowth (rhs)21,00019,00017,00015,00013,00011,0009,0007,0005,000tonne mile (bn, lhs)y/y growth (rhs)14%12%10%8%6%4%2%0%-2%-4%source: deutsche bank, clarkson research servicesfigure 4: dry bulk supply slippage. there continues to beslippage because of relatively low shipping ratessource: deutsche bank,

18、 clarkson research servicesfigure 5: dry bulk vessel demolition. 5% of fleetdemolished in 2012160140120100806040200-2040%30%20%10%0%-10%70.060.050.040.030.020.010.00.04.03.53.02.52.01.51.00.50.0schedule delivery (mn dwt, lhs)actual delivery (lhs, mn lhs)slippage (% of scheduled delivery, rhs)number

19、of vessels (lhs)capacity (mn dwt, rhs)source: deutsche bank, clarkson research servicesfigure 6: dry bulk vessel quarterly new contracts, lack offunding has kept orders low.source: deutsche bank, clarkson research servicesfigure 7: orderbook as % of fleet. lowest level since2005.40.035.030.025.020.0

20、15.010.0800700600500400300200100%80%60%40%20%5.00.01000%orderbook (mdwt, lhs)trading fleet (mdwt, lhs)quarterly new contracts (dwt mn)source: deutsche bank, clarkson research servicespage 2orderbook % fleet (rhs)source: deutsche bank, clarkson research servicesdeutsche bank ag/hong kongaug-12sep-12d

21、ec-11nov-12may-12dec-12feb-12mar-12jan-12jun-12oct-12apr-12jul-12oct-09oct-10oct-11jan-09jan-10jan-11jan-12nov-06nov-07nov-08nov-09nov-10nov-11may-07may-08may-09may-10may-11may-12nov-12oct-12apr-11apr-12apr-10apr-09oct-09oct-10oct-11apr-09jan-10jan-11jan-09jan-12oct-12apr-10apr-11apr-12jul-09jul-10j

22、ul-11jul-12jul-09jul-10jul-11jul-12mt-12 december 2012marineregional dry bulk shippingfigure 8: bdi trend over past 12 months. seasonalrecovery in 4q. 1q likely weak because of weather issues.2,5002,0001,5001,000figure 9: key commodities carried by dry bulk vessels.iron ore and china are still keyot

23、hers4%iron ore28%minor bulks34%5000steam coalgrains19%baltic dry index9%coking coal6%source: deutsche bank, clarkson research servicesfigure 10: china iron ore imports. a pickup over last twomonths. corroborated by capesize charters.source: deutsche bank, clarkson research servicesfigure 11: china c

24、oal imports. recent pickup here too.80.070.060.050.040.030.020.010.00.0chinas iron ore imports (mn tonnes, lhs)100%80%60%40%20%0%-20%-40%growth (y/y, rhs)30.025.020.015.010.05.00.0chinas coal imports (mn tonnes, lhs)700%600%500%400%300%200%100%0%-100%growth (y/y, rhs)source: deutsche bank, clarkson

25、research servicesfigure 12: iron ore inventory at major chinese ports hascome off highs.source: deutsche bank, reutersfigure 13: dry bulk freight rates and secondhand pricesas for the week of 07dec2012spot rate* time charter ratesecondhand price120.0100.0(us$/day)(us$/day, 1yr) (us$m, 5yrs old vesse

26、l)80.0handysize6,4087,25016.060.040.0handymax7,0638,12520.020.0panamaxcapesize7,26312,8758,12512,50018.032.5iron ore inventory at chinese major portssource: deutsche bank, bloomberg finance lpdeutsche bank ag/hong kongsource: deutsche bank, clarkson research servicesnote *spot rates represent the av

27、erage tripcharter rates among the main shipping routes for each vesseltype.page 3jan-00 jan-01 jan-02 jan-03 jan-04 jan-05 jan-06 jan-07 jan-08 jan-09 jan-10 jan-11 jan-12jan-00 jan-01 jan-02 jan-03 jan-04 jan-05 jan-06 jan-07 jan-08 jan-09 jan-10 jan-11 jan-12jan-07jan-08jan-09jan-10jan-11may-07may

28、-08may-09may-10may-11jan-12may-12sep-07sep-08sep-09sep-10sep-11sep-1212 december 2012marineregional dry bulk shippingfigure 14: dry bulk vessel newbuild prices. declines havestopped but no recovery yet.usd mn140120100806040200figure 15: dry bulk vessel secondhand prices (5 yrs old).similar trend to

29、newbuild prices.usd mn20016012080400handysizehandymaxpanamaxcapesizehandysizehandymaxpanamaxcapesizesource: deutsche bank, clarkson research servicesfigure 16: chinese railway infrastructure monthly spending200,000150,000100,00050,000-monthly railway infrastructuare spendings(rmbm)source: deutsche b

30、ank, clarkson research services300%200%100%0%-100%yoy growthsource: mor, deutsche bankfigure 17: bdi is seasonally lower in 1q after the 4q peak season in the previous year.4q avg bdi*1q avg bdiin the following year if 4q 1q200420052006200720082009201020115,1062,9124,16910,3181,1693,4012,3641,9284,5

31、722,4404,6697,3431,5623,0271,365861source: bloombergpage 4deutsche bank ag/hong kongdeutschebankag/hongkongpage5figure 18: regional dry bulk shipping companies valuation comparablescompanyticketcurr.price rectpcmktavg.p/ep/bvp/b troughavg p/bev/roecap3mo.turnover(x)(x)(x)(x)ebitda(x)(%)11-dec-12list

32、usd m usd m12e13e12e13e (2008-2009)past12e13e12e13e10yrspacific basin2343.hkhkd4.35 buy4.771,0792.6nm16.80.840.82 nov-080.541.3013.98.3-13.64.9stx pan ocean028670.kskrw 3,255 buy6,5006213.8nm32.20.350.35 nov-080.511.08nm15.0-17.51.2china cosco hldgschina shipp. dev1919.hk1138.hkhkdhkd3.69 buy4.10 bu

33、y3.905.004,8641,80111.211.9nmnm30.491.08 oct-080.48 oct-080.820.621.851.67nm35.230.015.3-25.5-dry bulk simple averagenm25.40.700.680.621.4824.5 1.7.1-14.73.0source: deutsche bank estimates, bloomberg finance lp, company datanote: note: average p/b and average roe are taken from j

34、un2002 to jun2012, or since the date that the companies were listed on stocknote:stx pan ocean and china shipping development have the lowest valuations among the regional peers on a p/b basis. p/b valuations are lower thanthe trough during the gfc in 2008/09.roes are higher in 2013e (versus 2012e),

35、 as we expect lower supply growth to result in a more favourable operating environment.net gearing levels have steadily been rising because of cash burn. pacific basins balance sheet looks the healthiest. low net gearing and ample cashallow means that the company can afford to buy vessels at attract

36、ive valuations. it also means that it can distribute a decent dividend when earningsrecover. it has a 50% payout policy.net gearing of stx pan ocean is close to 200% for the end of 2012e and is the highest in the sector. any move by the company to reduce this debtburden will be taken positively by t

37、he market in our view.china coscos container shipping business has helped offset the losses at dry bulk this year. the company will need to return to the black in 2013e toavoid being delisted according to a share rules.interesting to note that despite csd being less than half the market cap of china

38、 cosco, the average daily volume in usd terms are similar.na666.6.12 december 2012marineregional dry bulk shippingappendix 1important disclosuresadditional information available upon requestdisclosure checklistcompanypacific basin shipping ltdstx pan oceanchina shipping dvlpmtchina cosco hldgsticker

39、2343.hk028670.ks1138.hk1919.hkrecent price*4.36 (hkd) 11 dec 123,255.00 (krw) 11 dec 124.10 (hkd) 11 dec 123.70 (hkd) 11 dec 12disclosurena*prices are sourced from local exchanges via reuters, bloomberg and other vendors. data is sourced from deutsche bank and subject companiesimportant disclosures

40、required by u.s. regulatorsdisclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the united states.see important disclosures required by non-us regulators and explanatory notes.deutsche bank and/or its affiliate(s) owns one percent or more of any class

41、of common equity securities of thiscompany calculated under computational methods required by us law.important disclosures required by non-u.s. regulatorsplease also refer to disclosures in the important disclosures required by us regulators and the explanatory notes.deutsche bank and/or its affilia

42、te(s) owns one percent or more of any class of common equity securities of thiscompany calculated under computational methods required by us law.for disclosures pertaining to recommendations or estimates made on securities other than the primary subject of thisresearch, please see the most recently

43、published company report or visit our global disclosure look-up page on ourwebsite at http:/ certificationthe views expressed in this report accurately reflect the personal views of the undersigned lead analyst about thesubject issuers and the securities of those issuers. in addition, the undersigne

44、d lead analyst has not and will not receiveany compensation for providing a specific recommendation or view in this report. joe liewpage 6deutsche bank ag/hong kongsecuritypricesecurityprice..2 december 2012marineregional dry bulk shippinghistorical recommendations and target

45、 price: pacific basin shipping ltd (2343.hk)(as of 12/11/2012)6.00previous recommendationsstrong buy5.002buymarket performunderperform4.00346not ratedsuspended ratingcurrent recommendations3.00buyhold2.001.00sellnot ratedsuspended rating*new recommendation structureas of september 9,20020.00dec 10ma

46、r 11jun 11sep 11dec 11datemar 12jun 12sep 1204/01/2011:15/06/2011:06/09/2011:buy, target price change hkd6.30buy, target price change hkd5.30buy, target price change hkd4.4019/01/2012:12/03/2012:19/06/2012:buy, target price change hkd4.47buy, target price change hkd5.43buy, target price change hkd4.

47、77historical recommendations and target price: stx pan ocean (028670.ks)(as of 12/11/2012)14,000.0012,000.0010,000.00previous recommendationsstrong buybuymarket performunderperformnot ratedsuspended rating8,000.0012current recommendations6,000.004,000.002,000.0045buyholdsellnot ratedsuspended rating

48、*new recommendation structureas of september 9,20020.00dec 10mar 11jun 11sep 11dec 11datemar 12jun 12sep 1215/06/2011:19/01/2012:12/03/2012:hold, target price change krw7,550.00hold, target price change krw5,530.00hold, target price change krw7,400.0015/06/2012:07/09/2012:upgrade to buy, target pric

49、e change krw6,900.00buy, target price change krw6,500.00deutsche bank ag/hong kongpage 7securitypricesecurityprice...7.4.12 december 2012marineregional dry bulk shippinghistorical recommendations and target price: china shipping dvlpmt (1138.hk)(as of 12/11/2012)12.00previous r

50、ecommendationsstrong buy10.008.0023buymarket performunderperformnot ratedsuspended ratingcurrent recommendations6.0045buyhold4.0067sellnot ratedsuspended rating2.00*new recommendation structureas of september 9,20020.00dec 10mar 11jun 11sep 11dec 11datemar 12jun 12sep 1204/01/2011:17/03/2011:15/06/2

51、011:17/08/2011:buy, target price change hkd12.80buy, target price change hkd12.00buy, target price change hkd10.60buy, target price change hkd7.0019/01/2012:26/07/2012:07/09/2012:buy, target price change hkd6.00buy, target price change hkd5.10buy, target price change hkd5.00historical recommendation

52、s and target price: china cosco hldgs (1919.hk)(as of 12/11/2012)10.009.008.00previous recommendationsstrong buybuymarket perform7.006.0015underperformnot ratedsuspended ratingcurrent recommendations5.004.003.0023467buyholdsellnot ratedsuspended rating2.001.000.00*new recommendation structureas of s

53、eptember 9,2002dec 10mar 11jun 11sep 11dec 11datemar 12jun 12sep 1210/06/2011:04/09/2011:30/11/2011:downgrade to sell, target price change hkd5.80upgrade to hold, target price change hkd4.00hold, target price change hkd3.4023/02/2012:19/06/2012:07/09/2012:upgrade to hold, target price change hkd5.60

54、upgrade to buy, target price change hkd4.80buy, target price change hkd3.9019/01/2012:page 8downgrade to sell, hkd3.40deutsche bank ag/hong kong12 december 2012marineregional dry bulk shippingequity rating keyequity rating dispersion and banking relationshipsbuy: based on a current 12- month view of

55、 totalshare-holder return (tsr = percentage change inshare price from current price to projected target priceplus pro-jected dividend yield ) , we recommend thatinvestors buy the stock.45040035030025020056 %38 %sell: based on a current 12-month view of total share-holder return, we recommend that in

56、vestors sell thestockhold: we take a neutral view on the stock 12-month%buy16 %hold6%11 %sellout and, based on this time horizon, do notrecommend either a buy or sell.notes:companies coveredcos. w/ banking relationship1. newly issued research recommendations andtarget prices always supe

57、rsede previously publishedresearch.2. ratings definitions prior to 27 january, 2007 were:buy: expected total return (including dividends)of 10% or more over a 12-month periodasia-pacific universehold:expectedtotalreturn(includingdividends) between -10% and 10% over a 12-month periodsell: expected to

58、tal return (including dividends)of -10% or worse over a 12-month perioddeutsche bank ag/hong kongpage 912 december 2012marineregional dry bulk shippingregulatory disclosures1. important additional conflict disclosuresaside from within this report, important conflict disclosures can also be found at

59、https:/ under thedisclosures lookup and legal tabs. investors are strongly encouraged to review this information before investing.2. short-term trade ideasdeutsche bank equity research analysts sometimes have shorter-term trade ideas (known as solar ideas) that areconsistent or inconsistent with deu

60、tsche banks existing longer term ratings. these trade ideas can be found at thesolar link at http:/.3. country-specific disclosuresaustralia and new zealand: this research, and any access to it, is intended only for wholesale clients within themeaning of the australian corporations act and new zeala