Main points of investment
Asia's leading shipping and logistics companies have outperformed their peers. SITC International Holdings is a private enterprise headquartered in Hong Kong, mainly providing container shipping and logistics services, focusing on the regional market in Asia. The company's historical performance is sound, the proportion of dividends is high, and its business performance is better than that of its peers.
Discussion on the success factors of the company. The operating performance of the company is obviously better than that of ordinary shipping enterprises. we think it is mainly due to: 1) choosing a good track-focusing on the regional markets in Asia with active trade and competing with large integrated shipping companies; 2) providing good products-providing integrated land and sea logistics services and high-frequency sub-high-density airline services. 3) excellent operation and management-to create a standardized small fleet with characteristics, sound operation and good timing of shipbuilding.
There are good prospects for the medium-and long-term development of the Asian container market. On the demand side, with the sustained and rapid growth of China's economy, the cost advantage of production factors is decreasing, and the transfer of middle and low-end industries is a medium-and long-term trend. ASEAN countries are expected to partially undertake China's industrial transfer, which will continue to promote the demand for collective transportation in Asia; on the supply side, the "sulfur restriction order" of the International Maritime Organization (IMO) came into effect at the beginning of 2020, and environmental protection policies will help to accelerate the elimination of old ships and reduce the supply pressure on the market.
The high level of freight rates in Southeast Asia is at the best level in a decade. The company focuses on the Asian regional market, and from the performance of the Southeast Asian market, the freight rate of the container market is also at the high point of the business cycle. In 2021, the average freight rate of CCFI Southeast Asian routes was 1455.89 points, an increase of 88.33% over the same period last year. Freight rates are high in the Asian regional market, and the current average level of freight rates is the highest in 2010.
Investment advice: short-term still in the business cycle, long-term low-cost through the cycle. We estimate that the company's EPS per share in 2022-2024 will be 4.78 EPS 3.42 per share 2.74 yuan, and the share price on March 24, 2022 will be 24.24 yuan, corresponding to 8.9 times the PE level of 5.1 pound. SITC International Holdings reduces the fluctuation attribute of shipping cycle by extending the upstream and downstream of the industrial chain. With reference to the comparable company's PE valuation, the average PE valuation level after adjustment in 2022 is 8.99 times, and the company's PE valuation is lower than the industry average, covering for the first time and giving prudent overweight rating.
Risk hints: (1) the deterioration of intra-regional trade situation in Asia; (2) the growth of industry supply exceeding expectations; (3) vicious competition in the industry; and (4) large fluctuations in oil prices.