[ET Net News Agency, 6 September 2018] HSBC Global Research resumed coverage on Orient
Overseas (OOIL)(00316) with a lower target price of HK$47 from HK$61, and maintained its
"hold" rating.
The research house said OOIL is now a COSCO Group subsidiary. On 27 July, COSCO Shipping
(CSH)(01919) acquired 88.53% of OOIL's shares. Subsequently, on 17 August, CSH sold a
13.53% stake in OOIL to reduce its overall stake to 75% and restore the public float to
25% as per the listing rules.
CSH and OOIL guided to annual synergies of US$400m through network optimisation, joint
procurement, IT, and equipment utilisation.
In 2H 2018-2019, HSBC expects the supply-demand balance to narrow on lower incremental
vessel deliveries. Spot freight rates too have rebounded amidst capacity withdrawals, the
onset of the peak season, and a rush to ship cargo on the transpacific route before the
US-China tariffs kick in. But it also expects risks to demand, particularly in 2019, if
volumes fade once tariffs are implemented.
HSBC forecast a marginal profit of US$13m for OOIL in 2018 on a rebound in freight rates
on transpacific routes versus a loss in 1H. (KL)