• Results within expectation
• Core PATMI rose 8.9% YoY
• FV remains at HK$9.79

1Q19 Results Were Within Expectations

COSCO SHIPPING Ports Ltd's (CSP, 1199 HK) 1Q19 results were within expectations. Revenue increased 4.1% to US$247.7m. Adjusted PATMI rose by 4.7% YoY to S$72.5m – this excludes a one-off dilution effect of equity interests in QPI of US$22.6m. Regarding this dilution effect, QPI completed its share offering on 21 Jan 2019 which resulted in the group’s equity interest diluting from 18.41% to 17.12%.

As the share of contribution from the A share offer is less than the cost of deemed disposal, the group recognized a loss of US$22.6m on deemed disposal of partial interest in QPI. Going back to PATMI, if we also exclude a US$2.9m impact from the new HKFRS 16 reporting standards, core PATMI would have increased 8.9% YoY to US$75.4m or 21.1% of our full-year forecast. As a reference, 1Q18 PATMI contributed 21.3% of FY18 PATMI respectively.

Moderated Throughput Growth Seen in 1Q19 Was Expected

For 1Q19, total throughput increased by 5.6% YoY to 28.7m TEU while equity throughput increased by 7.7% to 9.3m TEU. In particular, equity throughput growth for subsidiaries was +13.3% while that for non-subsidiaries was +4.2%. As noted in our last report, we expected throughput data to come in soft for 1Q19 given the likely frontloading of orders in 4Q18 ahead of the previously scheduled tax hike.

Keeping to Throughput Growth Target of Low Double-digit for FY19F

Management is still sticking to its full-year target of low double-digit growth for total throughput. They noted a trend of increasing volume contributions from 2M and THE Alliance (+26.0% YoY for 1Q19) as well as the Ocean Alliance (+1.9% YoY for 1Q19), volume contributions from CSP Abu Dhabi, the trend of mega vessels calling at CSP Spain Group, and the increase in capacity at COSCO-PSA from 2m TEU to 5m TEU since Jan 2019. We maintain BUY on CSP (1199 HK) with an unchanged fair value of HK$9.79.

Source: OCBC Research - 29 Apr 2019