Incident: According to the Wind3C conference, China Ship Leasing Company held a 2020 annual performance exchange meeting on May 20. Chairman Zhong Jian, executive director and general manager Hu Kai, and company secretary Ding Weisong attended the conference to answer the concerns of investors and research institutes.
Questioner: Investors and research institutes; Respondent: Company answers
Short-term ship leases are subject to market fluctuations, and income from long-term leased ships is stable. China Ship Leasing Company operates a total of 90 ships. 73 are long-term leases and 17 are short-term leases. The short-term lease includes 6 bulk carriers, 4 gas carriers, 7 oil tankers for finished products and chemical tankers. In 2021, 7 short-term operating leased ships and 9 long-term chartered vessels will be launched. The rent for a short-term lease will be updated, and even for a one-year lease, the rent will be updated in stages, which is linked to the rent index. Long-term leases are more stable and are mainly linked to LIBOR and are priced using LIBOR and Margin. The project Margin that has already been signed will not change and will be fixed.
Focus on ship and clean energy equipment leasing business. The company is firmly optimistic about global demand for clean energy structures, continues to steadily promote the marine clean energy industry, continues to invest in the entire offshore LNG and LPG industry chain, establishes cooperative relationships with market-leading partners, expands offshore LNG refueling and low-sulphur oil refueling, and pays close attention to next-generation marine clean energy business opportunities such as offshore wind power hydrogen production, tidal energy, and offshore nuclear power.
Continue to stabilize the dividend payment policy. The company will maintain a stable and high dividend policy. The company has always had a 50% cash dividend ratio for the past two years, and will maintain it in the future. Most of the company's assets have long-term stable leases, stable cash flow, and basic conditions for continuous dividend payments.
The implementation of an equity incentive plan deeply binds the interests of management and shareholders, and the company has been optimistic about the ship leasing industry for a long time. It was mainly awarded to 19 core employees and issued 140 million shares at an exercise price of HK$1.32 per share. A second award can only be made more than a year after the first award, and the company is considering how to make a second award. The Group management's firm confidence in the future development prospects of the Group encourages management and all employees to create value for shareholders and promote sustainable growth in the company's efficiency.
Maintaining the core recommendation logic: the boom in shipping has increased, and the main leasing business has ushered in a golden age. Ship leasing mainly includes financial leasing and operating leasing. Financial leasing benefits from active ship transactions, and demand for financial leasing is expected to increase dramatically. The operating leasing business benefits from rising ship rents and asset prices. Compared with financial leasing, the operating leasing period is shorter, and the risk of residual value is borne by the company. After the original lease expires, the rent for the new lease is expected to rise sharply. The company's ship market price is expected to be higher than the book value, and disposal benefits are expected to increase dramatically.
We maintain the company's net profit of HK$13.4,16.32.0 billion for 2021-2023, corresponding PE of 6.6, 5.4, 4.4, and PB of 0.91, 0.83, 0.75. The company has been focusing on ship and clean energy equipment leasing business for a long time, and continues to pay stable dividends. The market is beginning to pay attention to Chinese ship leasing companies that were ignored during the shipping boom cycle, and the company's equity incentive policy will also motivate employees to create better performance in the long term. The current 1.0 times PB is below the industry average, and the 6.3% dividend rate is higher than comparable companies. Considering the improvement in the shipping cycle, the ROE center of Chinese ship leasing companies is expected to gradually increase from 12%. Maintain the buy rating.
Risk warning: Shipping cycle prosperity falls short of expectations; ship asset prices fall; financial leasers default.
