WHAT THE BROKER SAYS
China Shipping Development (CSD) will benefit from Hurricane Katrina, which swamped New Orleans and shut down most of the oil production in the Gulf of Mexico, Macquarie says.
Last month, the group said it had 77 tankers, totalling 2.91 million deadweight tonnes, at the end of June. Twelve ships were being built, with four to be ready by the year-end. State-owned China Shipping (Group) controls CSD, the country's biggest coastal shipper.
Macquarie believes more refined oil will be shipped to the US, given high petrol prices of US$3 or more per gallon and the scarcity of spot fuel. Clean tanker freight rates rose due to Katrina, which should also push up dirty tanker rates as owners of very large crude carriers (VLCC) will probably shift to hauling refined oil.
The broker raised its forecast earnings for this year by 9 per cent to 3.15 billion yuan and for next year by 3 per cent to 3.5 billion yuan because of expanding margins, rising VLCC rates and a better than expected first-half result. Last month, CSD had a 1.6 billion yuan net profit for the six months to June, compared with 885.85 million yuan in the same period last year.
The broker maintains its 'outperform' recommendation on CSD as concern over restructuring plans are fading. It sets a 12-month target price of $8.90, an upside of 43.6 per cent on the September 1 price of $6.20. The counter closed on Friday at $6.30.