COSCO & OOIL to form Asia’s largest liner with US$17B revenue and 12% global market share

Orient Overseas International Ltd (316:HK) rating: Buy
Orient Overseas International Ltd (316:HK) price target: HK$80.0

10 July 2018, Global – Today marks exactly one year after COSCO SHIPPING Holdings (1919:HK) and Shanghai International Port (600018:CH)’s Voluntary General Cash Offer for Orient Overseas International Ltd (316:HK) was first announced.

See our previous report on 10 July 2017 when the transaction was first announced:

Sweeter deal for acquirers COSCO (1919:HK) & SIPG than for target OOIL (316:HK)

Having met the pre-conditions, this deal is now near completion and we assess how the combined entity will look like:

Combined revenue of COSCO SHIPPING + OOIL will hit US$17.2 Billion, ranking it the largest container shipping line in Asia

COSCO SHIPPING and OOIL will have a combined current shipping fleet of 463 vessels and capacity of nearly 2.7 million TEUs, raising their global market share to 12%, ranking them the third largest container shipping operator in the world, below Maersk and MSC but above CMA CGM, Hapag-Lloyd, Evergreen Marine, Yang Ming among the major global container shipping companies.

COSCO SHIPPING and OOIL will have a combined container shipping revenue of US$17.2 Billion based on their 2017 financial data. This is 40% below the world’s largest carrier Maersk Line + Hamburg Sud’s total revenue but 31% above Ocean Network Express’ (formed by NYK, MOL and K-Line) combined revenue.

Chart: World’s Largest Container Shipping Lines Total Revenue in 2017 (US$ millions)

World’s Largest Container Shipping Lines Total Revenue in 2017 (US$ millions)

Chart: COSCO SHIPPING and OOIL: Combined Container Shipping Revenue (2017)

COSCO SHIPPING and OOIL- Combined Container Shipping Revenue (2017)

COSCO SHIPPING + OOIL will carry in excess of 27 million TEUs of containers

COSCO SHIPPING Holdings and Orient Overseas International Limited carried 20.9 million and 6.3 million TEUs in 2017, raising their combined container shipping volume to 27.2 million TEUs.

Chart: COSCO SHIPPING and OOIL: Combined Container Shipping Volume (2017)

COSCO SHIPPING and OOIL- Combined Container Shipping Volume (2017)

Combined market share will rise to 17% on the Transpacific trade lane and 14% on the Asia-Europe trade lane, ranking COSCO SHIPPING + OOIL the largest and third largest players in these two most important route regions

On the Transpacific trade lane, COSCO SHIPPING and OOIL will have a combined market share of 17% and will be the largest player in this route region, overtaking Ocean Network Express and Maersk. They are also part of the OCEAN Alliance which has a combined market share of 40% of the Transpacific trade lane, ranking OCEAN the largest container shipping alliance in this route region.

Chart: Transpacific Trade Lane Market Share (2018)

Transpacific Trade Lane Market Share (2018)

On the Asia-Europe trade lane, COSCO SHIPPING and OOIL will have a combined market share of 14%, the third largest player in this route region after MSC and Maersk. They are also part of the OCEAN Alliance which has a combined market share of 34% of the Asia-Europe trade lane, ranking OCEAN the second largest container shipping alliance in this route region after 2M Alliance.

Chart: Asia-Europe Trade Lane Market Share (2018)

Asia-Europe Trade Lane Market Share (2018)

Transpacific route region remains the largest revenue contributor, followed by Asia Pacific and Asia-Europe

The Transpacific trade lane will be COSCO + OOIL’s largest revenue contributor, accounting for 31% of total revenue. This is followed by the Asia Pacific trade lane at 25%, Europe (including Mediterranean) at 22%, Other International (including Transatlantic) at 11% and China Domestic routes at 11%.

Chart: COSCO + OOIL Combined Revenue Contribution by Route Region (2017)

COSCO + OOIL Combined Revenue Contribution by Route Region (2017)

Note: Stocks with upside of more than 10% based on our fair value are assigned an Outperform rating. Stocks with downside of more than 10% based on our fair value are assigned an Underperform rating. Stocks with upside or downside of less than 10% based on our fair value are assigned an In-line rating. These are Crucial Perspective’s proprietary rating classifications and by no means serve as investment recommendations.

Independent Research Declaration: Crucial Perspective does not own any position in the equities featured in this report nor have we received any compensation for writing this report. 

 

Related Reports:

Sweeter deal for acquirers COSCO (1919:HK) & SIPG than for target OOIL (316:HK)

Global shipping stocks to correct further if trade weakens

Global ports sector heads closer to trough valuations than shipping

Transpacific shipping rates to drop further with impending trade wars

China-US shipping rates tumble on overcapacity and trade tariffs double whammy

US–China/Japan deficit may spell pain for COSCO Shipping & Ocean Network Express

COSCO SHIPPING Holdings gains market share and cost efficiency in 1Q18

Cruise Ships, LNG Carriers, Drillships to lead newbuild expansion

Global shipping industry’s US$231 Billion CAPEX needs far exceed combined market cap

 

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