The company's recent situation
China Merchants Shipping announced that it plans to split its subsidiaries Sinotrans Container Transport Co., Ltd. (100% shareholding) and Guangzhou RoRo Transport Co., Ltd. (70% shareholding) to achieve restructuring and listing through restructuring with Antong Holdings. Antong Holdings plans to acquire certain shares of Sinotrans Shipping and Guangzhou RoRo by issuing shares to China Merchants Shipping and paying cash (if any). After this spin-off is completed, the company's shareholding structure will not change; for Antong Holdings, after the deal, Antong will become the controlling shareholder of Sinotrans Shipping and Guangzhou RoRo. The deal constitutes a major asset restructuring, and trading of its shares has been suspended.
reviews
China Merchants Shipping continues to hold this asset indirectly through Antong Holdings. The specific shareholding ratio depends on the consideration for subsequent transactions. According to the company announcement in 2023, Sinotrans Shipping and Guangzhou RoRo have total net assets of about 3.58 billion yuan, with a total net profit of about 1.14 billion yuan. As of March 31, 2024, Antong Holdings' cash book was about 1.18 billion yuan, and the market value of Antong Holdings was RMB 8.9 billion. After the completion of this spin-off, China Merchants Shipping's shareholding ratio to Antong will depend on the consideration of subsequent transactions and the ratio of cash and share payments.
If it progresses smoothly, China Merchants Group's shipping assets will be further integrated, which is expected to achieve strong synergy effects. Antong's controlling shareholder is China Aviation Logistics (holding 11.39% of the shares), but there is no actual controller. China Aviation Logistics's partners are composed of central and state-owned enterprises such as China Merchants Port, China Aviation Trust, Quanzhou Jiaofa Real Estate, Liaoning Port Group, and Quanzhou Industrial Investment. At the business level, Antong's target assets in the shipping and roll-loading business can leverage business collaboration: 1) In terms of shipping, according to Alphaliner, Antong is in the top three in the domestic trade shipping industry and participates in international container shipping through external leasing. Sinotrans Shipping specializes in container transportation within the Asian region, especially the China-Japan route and the strait route. After the merger, the shipping fleet size was expanded, and the routes were complementary, and customers, land transport logistics, etc. could also be shared. 2) In terms of automobile Ro-Ro, Guangzhou China Merchants Ro-Ro has also set up domestic and foreign car roRo transportation services. As of the end of 2023, the company had 22 Ro-Ro ships, with a total number of 410,000 parking spaces, and has ordered 6 car ships. Ro-Ro ships and container ships have certain complementarity, which can enhance each other's customer service capabilities.
China Merchants Shipping will focus on oil, gas and dry dispersion businesses. Business simplification is beneficial to the company's long-term development. We believe that after the consolidation and automotive roll-roading business is split and listed, the company will still be held indirectly through Antong. The company itself will focus on operating oil, gas, and dry dispersion transportation. Oil transportation and dry dispersion are all highly flexible sectors and the cycle is improving. The LNG business continues to grow, which will help the capital market to price the company more reasonably.
Profit forecasting and valuation
Considering that the transaction still requires a shareholders' meeting and regulatory review, keeping the profit forecast unchanged, the current stock price corresponds to 2024/2025 10.7 times/9.9 times P/E, maintaining the outperforming industry rating and the target price of 9.6 yuan/share, corresponding to 11.6 times/10.7 times P/E in 2024/2025, which is an 8.2% increase from the current stock price.
risks
The global economic growth rate has declined, and geopolitical changes have changed.