geoffrey.cheng@bocomgroup.com
Tel: (852) 2977 9380
3Q13 earnings at US$33.9m. SITC reported cumulative earnings of US$85.3m for
9M13, up 21.5% YoY. Net profit was about US$33.9m in 3Q13, up 18.6% YoY. For
9M13, gross margin reached 11.3%, up from 10.4% in 1H13. Gross margin in 3Q13
surged to an estimated 13.2%, the highest quarterly performance for the year. In
3Q13, its container shipping fleet transported 0.51m TEU, up 10.2% YoY. For the first
three quarters, the cumulative volume of its container shipping operation grew 11.9%
YoY to 1.46m TEU. Average revenue per TEU shipped was US$487 for 9M13, lower
than US$493/TEU in 1H13. Revenue for 9M13 reached US$905.0m, up 2.3% YoY.
For 9M13, container volume handled by its land-based logistics operation rose 10.8%
to 1.14m TEU.
Special dividend of HK$0.1 declared. Management of SITC mentioned before that
its gross margin could probably expand as a result of the replacement of business tax
by the VAT system since 1 August. Gross margin reached 13.2% in 3Q13, up from
11.7% YoY in 2Q13. Operating margin also surged to 10.8% in 3Q13, up from 8.7%
in 1H13, but was slightly lower than 10.9% in 2Q13. Management announced in its
3Q13 results that SITC will pay a special dividend of HK$0.1 per share (payable on 29
November 2013) – a payout ratio of 39.4% on the cumulative earnings for 9M13.
Based upon the last closing price (HK$2.92), this special dividend yields 3.4%.
We upgrade to LT BUY recommendation. The share price of SITC retreated 6.7% in
the past week, the worst performance amongst the HK-listed container shipping
companies. As a result of the good 3Q13 results, we have revised up our earnings
forecasts as below. Our FY13-14 earnings forecasts are above Bloomberg consensus
forecasts by 11.4% and 2.7%, respectively. The special dividend is a short-term
catalyst, in our view, but the share price may benefit in the near term from upward
earnings forecast revisions by the market. On the basis of our new earnings forecasts,
we raise our target price from HK$2.9 to HK$3.25, which is based upon the low-end of
the PBR range in FY09-11. We upgrade our recommendation from NEUTRAL to LT
BUY.
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