According to Alphaliner, The number of listed container shipping lines with a valuation of more than $10 billion rose to six this month, closely followed by two more lines. A resurgence in container lines share value follows on the back of broad gains in the stock market and the realization that supply chain disruption is so far offsetting a decline in demand from carriers by of consumers.
Most container line shares have risen between 15% and 40% since the beginning of July, when share values bottomed out in the first week after the previous drop.
The momentum continued last week after Hapag-Lloyd announced a significant increase in full-year forecasts and ONE revealed more record earnings for the second quarter. Hapag-Lloyd now expects operating profit (EBIT) of USD 17.5-19.5 billion for 2022 against original projections of USD 12.5-14.5 billion in May. NOO Costamare added that port congestion remained high in the second half of the year, while charter deals were still being signed at record levels.
Rising share prices have once again lifted the market capitalization of major players, expanding the list of “large cap” companies. Two listed European and four Asian container companies are now valued at more than $10 billion, after price gains saw Wan Hai Lines rejoin the group.
With more price increases expected, Hong Kong-based HMM and SITC International, with valuations as of August 1 of $9.4 and $9.0 billion, could also join the list.
Before the pandemic, only two companies, Maersk and Hapag-Lloyd, qualified as large-cap companies. Meanwhile, only one line, Regional Container Lines, is classified as “small cap”, down from 6 container companies at the beginning of 2020.
Underscoring the earnings impact of the pandemic, as of August 1, the top 11 publicly traded airlines had an aggregate market capitalization of more than $200 billion, a figure that topped $250 billion in September 2021. and March of this year. The market capitalization of the same companies in January 2020 was around $60 billion, adjusted for the incorporation of ZIM in February 2021.
Meanwhile, container stocks continued to rise on Monday, despite a cut in the IMF’s GDP forecast and news that the world economy slipped into recession in the second quarter due to recessions in Russia and China.
The IMF warned that high inflation and the war in Ukraine were now having a material effect and could push the world economy into recession. The Fund cut forecast growth to 3.2% for 2022 and 2.9% for 2023.
Despite recent gains in stocks, airlines are still well below their 52-week highs, with Asian airlines seeing their shares hit the hardest. Analyst recommendations also vary widely from carrier to carrier:
MAERSK
· Maersk Group: The Danish company has seen its shares rise almost 20% since the beginning of July, and is currently around 20% below its 52-week high recorded in January. JP Morgan upgraded the company’s rating to “buy” on July 1 and set a price target of DKK 30,800.
Hapag-Lloyd
· Hapag-Lloyd shares bottomed out in the first week of July and have risen around 40% since then, although its shares are closely traded, distorting the results. It is about 25% below 52-week highs, although Goldman Sachs and JP Morgan maintain a sell rating.
EVERGREEN
Evergreen Marine: The sixth-largest airline saw a rebound in early July and is up 20% over the past month, though like other Asian carriers its shares remain significantly off highs, up 45% below its 52-week high in March. .
ZIM
· Shares of ZIM have also rallied since the first week of July, although it has risen a more modest 15% over the past month. Jefferies initiated coverage on July 21 with a ‘hold’ rating with a $55 price target. ZIM is about 45% below its 52-week highs, Alphaliner says.
Source: Alphaliner
