CKH HOLDINGS(US:CKHUY)2024-06-12 02:07Investment Rating - The report assigns a "Buy" rating to both China Merchants Port and COSCO Shipping Ports, indicating a positive outlook for these companies in the port industry [8][10]. Core Insights - The year-to-date (YTD) volume performance for both companies aligns with China's strong export growth, exceeding their initial guidance for the year [2][4]. - Despite a 10% year-over-year decline in throughput at the Piraeus Container Terminal due to disruptions, overall volumes in Western and Northern Europe have improved, with Spain and Zeebrugge terminals seeing increases of 7% and 13% respectively [2][4]. - Both companies maintain their guidance for port operation tariffs, projecting a 0-2% year-over-year growth, with potential upside from increased storage income due to port congestion [2][6]. Summary by Sections Volume Performance - China Merchants Port reported an 8% increase in overall throughput volume for the first four months of 2024, with overseas portfolio growth at 13% and domestic growth at 7% [4]. - Excluding the disposed Ningbo Daxie terminal, organic growth was 11% year-over-year [4]. - COSCO Shipping Ports also experienced a 9% increase in throughput volume for the same period [4]. Pricing and Tariffs - China Merchants Port has completed tariff contract negotiations, expecting a 1-2% year-over-year growth in tariffs for China terminals and 3-4% for overseas terminals [6][9]. - Storage income, which typically accounts for 10-15% of total revenue in normal years, may provide additional upside amid port congestion [6][9]. Expansion and Dividends - China Merchants Port is focusing on overseas investment opportunities while acknowledging challenges in finding suitable assets [7]. - The company increased its dividend payout ratio to 47% for FY23, up from 42% in FY22, and has shifted to cash dividends only [7]. Investment Thesis - The investment thesis for COSCO Shipping Ports highlights growth potential from continued tariff hikes, volume growth driven by parent company support, and overseas expansion [9]. - For China Merchants Port, the thesis emphasizes market share gains from Shanghai and Shenzhen and ongoing tariff increases to offset inflation [13].