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Asia: Asia Transportation Sector





Asia Transportation Sector

Asia Transportation Sector: Stocks have rebounded; what about fundamentals?

● Some transportation stocks have rebounded as much as 50–60% in the past month. While we believe sector valuation is still generally low, we would be more selective on stocks given the different operating environment they are in right now. We have a recap on the recent operating environment in our report.
● While we remain cautious in the medium term on oversupply in bulk shipping, we believe the short-term BDI rally should continue.
The BDI is seasonally stronger in 1Q and 4Q. We like CSD and Pacific Basin (profitable but trading below book). Regional airlines managed to report decent passenger YoY growth after the summer. Seasonally, 4Q is stronger for aviation passenger and cargo demand. We like AirAsia, China Southern and CX.

● With stable tariff and our expectation of 9% throughput growth in 2012E, port operators could make decent profit next year. We like CMHI and Cosco Pacific. Operating environment remained weak for container shipping, but stocks’ valuations are low. We prefer OOIL due to its better track record and low P/B (0.7x).

Chinese airlines’ September passenger traffic (in RPK terms) grew 12.9% YoY for the whole industry (versus 7.8% YoY in August).
October operating data should turn stronger sequentially on good Golden Week performance and strong business travel demand. We expect air fares to improve MoM in October.

Asia Transportation Sector Valuation metrics

China container throughput growth remained decent

Transportation - note: