In the Yangtze River Delta, throughput growth from Ningbo Yuandong Terminals remained resilient (+17.7% yoy). However, other terminals’ throughput plunged. Overall throughput volume in the Yangtze River Delta dropped 17.9% yoy in May 09.
Bohai Rim and overseas. Again, only the Bohai Rim region registered throughput growth in May 09 (+4.9% yoy), mainly driven by Yingkou Container Terminal (+50.9% yoy) as domestic transshipment business recorded robust growth. This is in line with our expectations that container throughput in the Bohai Rim may see an earlier recovery and continue to outperform Pearl River Delta and Yangtze River Delta. This is because: a) the Bohai Rim has a larger portion of state-owned enterprises which may benefit more from the government’s Rmb4t stimulus packages and loans expansion, and b) Bohai Rim’s industrial production has been exceeding the national average. Overseas container throughput plunged 22.3% yoy in May 09. It was dragged down by COSCO-PSA Terminals (-48.9% yoy) and Antwerp Gateway (-54.9% yoy).
Outlook. With the recent economic data showing positive signs (PMI, industrial production and imports from Asian countries), China’s exports may register smaller declines. In our view, China’s export prospects are turning more positive. We foresee China’s exports to gradually show a mild recovery from the distressed levels in 1Q09.
May – September has been a traditionally high season for CP’s container throughput volume. During 2004-07, the throughput numbers recorded mom increase in May – September. Therefore, if it follows the previous seasonality and trends, CP’s throughput volume may continue to improve on a mom basis.
CP is trading at 10.0x 2009F PE (vs historical average of 13.6x PE) and 0.91x 2009F P/B (vs historical average of 1.9 P/B), at a discount to its peers’ average. Also, with CP’s decent dividend yield and improving outlook, we regard its valuation as attractive.
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