COSCO Pacific's 3Q14 earnings momentum picks up from 1H14 with 8.5% growth

Thanks to solid port performance.

COSCO Pacific's 3Q14 recurrent earnings were USD86.9m, up 8.5% YoY and 5.5% QoQ, accelerating from +2.1% YoY in 1H14.

According to a research report from Maybank Kim Eng, however, gross profit declined 1% YoY on weaker leasing profit.

Still, good cost management extended into 3Q14 as administrative expenses were flat YoY and decreased 18.8% QoQ. Thanks to new projects like Asia Container Terminal (ACT) and Taicang and better JV ports, contribution from associates/JCEs grew 5% YoY. These new projects fuelled an 8.7% throughput growth in 3Q14.

Container leasing achieved a utilization of 95.7% in 3Q14 (vs 94.6% for 3Q13 and 94.8% for 1H14). While fleet size rose 2.1% YoY for 9M14, lower leasing rate and box disposal gain (due to lower second-hand box price) have led to weaker leasing profit, partly offsetting the port momentum.

Here's more from Maybank Kim Eng:

9M14 recurrent earnings grew 4.4% YoY to USD233.7m, reaching 76% of FY14F earnings.

Factoring in the latest throughput for Yantian, Dalian and COSCO-PSA, we raise FY14F throughput growth to 9.1% (from 8.8%) and FY15F to 7.1% (from 6.9%).

We fine-tune FY14-16F earnings and expect earnings growth of 7% for FY14F and 12.8% for FY15F.

FY15 earnings should accelerate as port earnings will be supported by smaller losses at Xiamen, full-year contribution from ACT and stronger overseas projects.

Leasing profit should improve on the back of steady recovery and higher replacement demand.

Still expect box disposal profit to be low but with a low base in FY14, leasing should return to growth in FY15.