Summary of Container Shipping & Shipbuilding Insights Industry Overview - The container shipping and shipbuilding sectors are experiencing increased confusion regarding demand dynamics, with mixed signals about whether demand is strong or weak, pent-up or front-loaded [2][6][8] - Maersk has reported robust demand outside the US, while the US market remains cautious due to tariff uncertainties [2][20] - ICTSI has observed no evidence of cargo front-loading at its ports, complicating the understanding of demand patterns [2][6] Key Companies and Financial Outlook Maersk - Maersk raised its guidance due to strong demand outside North America, expecting global container market volume growth of 2-4% [20][31] - Financial guidance was increased by 17% at the mid-point, with EBITDA raised to US$8-9.5 billion and EBIT raised to US$2-3.5 billion [20][31] ONE - ONE cut its FY25 outlook due to reliance on volatile US routes, lowering EBITDA to US$2.6 billion from US$2.9 billion [21][33] COSCO - COSCO's 1H25 net profit is expected at RMB 18.8 billion, an 11% increase year-over-year [6][38] - Price targets for COSCO have been raised to HKD 21 for COSCO-H and RMB 24 for COSCO-A [6][38] OOIL - OOIL reported a 4.4% year-over-year increase in overall lifting volume for 1H25, with a net profit preview of USD 840 million, up 1% year-over-year [39] Evergreen Marine - Evergreen Marine's 1H25 net profit is expected to see a 2% year-over-year increase, with a price target raised to TWD 352 [6][40] Demand Dynamics - Global container demand grew by 2.6% year-over-year in June, supported by strong Asia-Europe trades [6][8] - Chinese exports in July 2025 rose 7.2% year-over-year, driven by manufacturers rushing to meet tariff deadlines [22][23] Geopolitical and Economic Factors - The Red Sea crisis continues to absorb industry capacity, impacting shipping routes and contributing to port congestion [14][15][28] - USTR 301 tariffs are influencing industry strategies, with Maersk indicating it will not charge customers fees related to these tariffs [16][20] Inventory Levels and Market Sentiment - The US inventory-to-sales ratio indicates increased inventory levels due to pre-stocking activities, with the Logistics Managers' Index (LMI) showing a decline in inventory levels [12][13] - The US market is adopting a "wait-and-see" approach due to tariff uncertainties, which may lead to a spike in demand as tariff deadlines approach [9][10] Challenges and Opportunities - Port congestion remains a significant challenge, particularly in Europe, due to underinvestment in capacity [14][27] - The ongoing geopolitical uncertainties present both risks and opportunities for investment in shipping stocks with strong exposure to non-US markets [23][30] Conclusion - The container shipping and shipbuilding sectors are navigating a complex landscape characterized by mixed demand signals, geopolitical uncertainties, and evolving market dynamics. Companies like Maersk, COSCO, OOIL, and Evergreen Marine are adapting their strategies to leverage opportunities while managing risks associated with tariffs and global trade disruptions.

US-Australia Relations & Strategic Alignment - The US-Australia alliance is considered vital by both nations, despite the absence of a meeting between President Trump and Anthony Albanese [4] - The relationship is too significant to fail, prompting discussions on friction points like tariffs and defense spending [5][6] - A non-public review of AUKUS (orcas) has been conducted by Australia, aligning with strategic objectives to enhance submarine capabilities and counter China's assertiveness [15][16] - The US may be leveraging AUKUS to encourage increased Australian defense expenditure [17] Trade & Security Concerns - Trade tensions and tariff uncertainties complicate strategic directives aimed at China [1][2] - Critical minerals cooperation is increasingly important for both security and trade, especially as China weaponizes access to rare earth minerals [6][7][8] - Australia and the US signed an agreement ~18 months ago to expand collaboration on clean energy, climate change, and critical minerals [7] - Australia aims to ensure a trusted supply chain for the US and allies [8] Pacific Engagement & Regional Influence - The US has increased engagement with the Pacific, but development assistance is under review, raising concerns about episodic engagement [9][10][11] - Australia is the largest bilateral provider of aid to the Pacific, prompting discussions about whether it should increase its contribution if the US reduces its engagement [13][14]

Investment Rating - The industry investment rating is In-Line [5]. Core Insights - The 2Q25 iPhone build estimates have been raised by 4 million units to 45 million units, reflecting a 10% decrease quarter-over-quarter but a 15% increase year-over-year. This adjustment is made to maintain legacy model stocking amid tariff uncertainties, rather than indicating strong demand [1][7]. - The 2Q25 iPad build forecast has been increased by 1.5 million units to 13 million units, representing an 8% increase quarter-over-quarter and a 24% increase year-over-year. This is attributed to stronger-than-expected stocking momentum ahead of tariffs [2][7]. Summary by Sections iPhone Production - The iPhone production in 2Q25 is estimated at 45 million units, which is a 10% decline from the previous quarter but a 15% increase compared to the same quarter last year. This is primarily to keep legacy models stocked amid tariff uncertainties [1][7]. - Supply chain checks indicate that assembly partners are likely to accelerate production diversification, particularly increasing iPhone production in India, which is expected to be less than 15% in 2024 [1]. iPad Production - The iPad build forecast for 2Q25 has been raised to 13 million units, reflecting an 8% increase quarter-over-quarter and a 24% increase year-over-year. This increase is due to stronger-than-expected stocking momentum ahead of potential tariffs [2][7]. - The assembly split for iPads is approximately 70% in China and 30% in Vietnam, indicating less urgency to diversify production compared to iPhones [2].

Core Viewpoint - The investment strategy focuses on fundamental, bottom-up analysis with an emphasis on long-term quality growth, targeting companies in niche markets with strong growth potential and reasonable valuations [1]. Group 1: Investment Strategy - The investment style is characterized by a fundamental approach, prioritizing quality growth-oriented companies [1]. - The portfolio is constructed with 15-20 stocks, emphasizing diversification, risk management, and macro-driven sector weights [1]. - The target annual return for the portfolio is set at 15% [1]. Group 2: Company Characteristics - The ideal companies are those with strong management teams, sound capital allocation policies, and reasonable valuations [1]. - There is a specific focus on companies that do not chase quarterly results or follow herd mentality [1].