Overview of the Shipping and Ports Sector in 2025
As 2025 unfolds, the global shipping and ports sector is positioned for a volatile year, influenced by significant geopolitical and industry-specific developments. While global trade indicators suggest a tepid outlook, opportunities and risks abound within the sector. The report by UOB Kay Hian recommends maintaining a MARKET WEIGHT stance, highlighting key players like COSCO SHIPPING Holdings (CSH), Orient Overseas International (OOIL), COSCO SHIPPING Ports (CSP), and China Merchants Port (CMP). Let’s delve into a detailed analysis of each company and their prospects for the year ahead.
COSCO SHIPPING Holdings (CSH): HOLD Recommendation
COSCO SHIPPING Holdings (Ticker: 1919 HK) is a major player in the container shipping segment. The report assigns a HOLD rating with a target price of HK\$12.79, closely aligned with the current share price of HK\$12.78.
Performance and Earnings Outlook
In 2024, COSCO SHIPPING Holdings achieved impressive earnings, with an anticipated net profit of Rmb47.7 billion, representing 100.1% year-on-year growth. Despite this stellar performance, the 2025 forecast indicates a moderation, with projected net profits of Rmb25.0 billion, reflecting a 4% upward adjustment from previous estimates. Earnings for 2024 are poised to be the third highest in the company’s history, following the pandemic-driven highs of 2021 and 2022.
Key Risks and Opportunities
The company faces potential downside risks in 2025, including the threat of tariff hikes on US imports, stabilization in the Middle East releasing additional shipping capacity, and intensified competition due to the re-composition of shipping alliances. On the upside, a possible US East Coast port strike could drive a surge in freight rates, benefiting CSH’s earnings. Additionally, the company’s strong dividend outlook, with an estimated payout ratio of 50%, may appeal to investors.
Orient Overseas International (OOIL): BUY Recommendation
Orient Overseas International (Ticker: 316 HK) receives a BUY rating with a target price of HK\$127.80, suggesting a 7.2% upside from the current price of HK\$119.20.
Performance and Earnings Outlook
OOIL is expected to close 2024 with robust earnings, forecasting a net profit of US\$2.56 billion, a remarkable 87.4% year-on-year growth. For 2025, adjusted net profits are estimated at US\$1.34 billion, a 5% upward revision from prior projections. The company’s ability to capitalize on rising freight rates positions it favorably within the container shipping segment.
Competitive Edge
OOIL stands out for its slightly cheaper valuation compared to peers and a strong track record of paying special dividends during profitable years. The company’s strategic capacity management and its ability to benefit from potential freight rate surges make it a compelling investment choice for 2025.
COSCO SHIPPING Ports (CSP): BUY Recommendation
COSCO SHIPPING Ports (Ticker: 1199 HK) is a prominent player in the port segment, earning a BUY rating with a target price of HK\$5.72, indicating a significant 25.2% upside from its current price of HK\$4.57.
Performance and Growth Prospects
In 11M24, CSP recorded a 6.1% year-on-year growth in container throughput, aligning with its guidance for mid- to high-single-digit growth for the full year. However, recent months have seen a slowdown, with a 4.9% year-on-year growth rate from September to November 2024. The company’s diversified geographical presence mitigates potential risks from US tariff hikes, with limited revenue exposure to US trade.
Valuation and Dividends
CSP’s valuation remains attractive, supported by steady cash flows and a sustainable dividend yield of 5-6%. The company’s geographical diversification and low interest rate environment in China make it a strong candidate for re-rating in 2025.
China Merchants Port (CMP): BUY Recommendation
China Merchants Port (Ticker: 144 HK) is another key player in the port sector, receiving a BUY rating with a target price of HK\$14.76, reflecting a 10% upside from its current price of HK\$13.42.
Performance and Growth Prospects
CMP achieved an 8.2% year-on-year growth in container throughput for 11M24, outpacing its peers. Despite potential headwinds from US tariff hikes, the company’s geographical diversification limits its exposure to US trade. For 2025, CMP’s earnings forecast has been slightly trimmed to reflect unfavorable forex translation due to the renminbi’s depreciation against the USD/HKD.
Dividend and Valuation
Like CSP, CMP benefits from steady cash flows and a dividend yield of 5-6%. Its valuation remains appealing, with potential for re-rating as investors seek yield-driven opportunities amidst China’s low interest rate environment.
Market Trends and Sector Outlook
Global trade indicators paint a mixed picture for 2025. The Global Manufacturing PMI dipped to 49.6 in December 2024, signaling subdued manufacturing activity, while the new export order sub-index remained in contractionary territory for the seventh consecutive month. Similarly, China’s manufacturing PMIs hovered near 50, with export orders showing lackluster performance.
Freight Rates and Capacity Dynamics
Freight rates rebounded in late 2024, driven by capacity management and frontloaded demand ahead of potential US port strikes. However, futures prices suggest a slowdown in freight rates later in 2025. Additionally, global container shipping capacity growth is expected to outpace demand growth, further pressuring rates.
Geopolitical and Industry Challenges
Key challenges for 2025 include potential tariff hikes, Middle East stabilization releasing more shipping capacity, and increased competition from re-composed shipping alliances. Nonetheless, upside risks, such as a prolonged US port strike, could offset some of these headwinds.
