Asia Pacific: Conglomerates

Jan 2011 through put rose by 18%, partly distorted by CNY

According to Minister of Transport, the Jan throughput of China container rose by 18% yoy to 13.5 million TEUs. This represents a mom growth of 10%. The performance in Jan is positively affected by an earlier CNY in 2011 (Feb 3 vs Feb 14 in 2010), when factories and exporters front-loaded most of the cargoes. However, GS economist still believes Jan trade data reflects strong underlying growth driven by both external demand and domestic consumption. Among the top 8 ports, container throughput in Yangtze River continues to lead, up 25% yoy, followed by 19% in Bohai rim.

Feb likely to be weak, total data of 2 months are more comparable

Despite a strong start of 2011, GS expects Feb to be a weaker month due to the CNY effect and an absence of low base effect. Data from SIPG (Shanghai International Port Group) suggests a daily run rate of around 65,000 TEU month to date, which indicates 3% yoy decline in Feb. It makes more sense to compare the total throughput data of the 2 month and expect the growth to be in line with 2011 full year forecast of 11.5%. Looking ahead, with continued recovery of US, which will continue to benefit YRD and PRD, and increasing intra-Asia trade, the throughput data is on track to reach that full year forecast.

Prefer COSCO Pacific and Dalian Port within China Port Sector

COSCO Pacific (1199.hk) remains top pick with new port turning around to underpin high earning growth (21% in 2010E Vs 3% for China Merchants). Valuation also looks undemanding, trading at 14x 2011E P/E vs mid-cycle valuation of 17x.

On the bulk side, GS prefers Dalian Port (2880.hk), which has underperformed its peers by 10% ytd due to its relatively low earnings contribution from container business. GS believes the current weakness offers a good entry point as the mid-term catalyst of new petrochemical plant remains intact.

From GS Asia Pacific: : Conglomerates 23 Feb 2011

Comment: Data from SIPG largely overstated the actual throughput. Should consider the impact.