Mixed read from profit alerts

    The three Chinese shipping companies issued alerts on their FY14 results respectively.Reported net profits are well-anticipated by the market given the government subsidieson scrapping YTD. Taking a closer look, it was the container-players making the mostprofits in Q414. In contrast, China Shipping Development (CSD) had not made muchmoney in the last quarter, despite the rally in the spot tanker rates. The profit alerts putthe upcoming reporting season behind and we are now reviewing our forecasts.

    CSCL surprises the most in Q414

    China Shipping Container Lines (CSCL) benefited from the spot freight rates holding upand lower bunker price since end-Q314. Based on the company's estimated profit ofRmb1.05bn for FY14 (versus net loss of Rmb265m in FY13), we estimate it had roughlyRmb309m from operations in the Q414, after deducting the government subsidies ofRmb77m. This is more than its Q314's net profit of Rmb203m and impressive given Q4tends to be weaker than Q3.

    COSCO's profit confuses by one-offs

    China COSCO Holdings (COSCO) stated its FY14 net profit of at least 50% higher thanits 2013's reported profit of Rmb235m. This represents a turnaround from theRmb654m net loss in 9M14. We estimate its container business is driving theimprovement. However, we estimate part of it is from one-off gains related torestructuring, offsetting the reported loss on vessels disposal of Rmb123m in Q414.

    CSD seems barely profitable in Q414

    CSD stated that its FY14 net profit would be around Rmb300m. This implies Q414 wasbarely profitable after deducting the Rmb85m 9M14 net profit and Rmb241m subsidiesfrom the government to be booked at year-end. However, our view of a 2015 growthstill holds given its earnings tend to lag behind the spot tanker and bulk freight rate.