1、 UBS InvestmentResearchGlobal Freight Transport - Outlook 2011 Outlook 2011 Volumeandpricing are the keysfor 2011 After the dramatic recoveryof2010,webelieveweare infor a more “normal”year in2011, withglobalfreightvolumesgrowing4-6%. Inthiscontextweprefercompanieswitheither a volumestory(i.e. exposu
2、re to stronggeographies/verticals)or pricing(barriersto barrier orconsolidated markets).Industrial freightdemandis likelytocontinuetobea maindriver ofgrowth. Political Economy isa danger if it interfereswith trade volumesThusfar wehavenotseena returntothe situationofthe 1930swhentradevolumescollapse
3、d inthe faceofbotheconomic issuesand trade barriers.Thegreatest risktotransport companies is that trade disputesescalate and result inbarriersbeingerected. Re-leveraging growthopportunitiesmore likely to be pursuedWebelievethat withcashflowreturningcompanies are likelytofocus onexpandinginEmergingMa
4、rkets,where there ismostgrowth. Althoughwedo seesomecompanies(e.g. UPS,NorthAmericanRailroads) buyingbackstock,thesectoris likelytocontinuetorunwithlowdebtinorder tooffset operationalcyclicality.Mostwill the western consumer show anysignsofgrowth; andwill the emergingmarket becomemore importantinglo
5、baltrade.Ifthe later is truethenit will changethe patternofglobal trade andhaveadramaticimpacton transportof allmodes. What are thelikely key catalysts in2011? The start to the year willbe crucial, given the year-on-year comparables are tougher buthowthe year startsisusuallya goodindicatorfor howthe
6、 restoftheyear will develop. Transportis a sector with amultitudeof data points but webelievethe keydata will be: international airfreight, North American Railvolumes and Chinese Portvolumes. Iftwo or more of these indicators showweakness then 2011 could be a difficultyear. Asper usual,macro indicat
7、ors (ISM, industrial production) will also be crucial. GlobalFreightTransport-Outlook 201130 November2010UBS 4What are ourmost non-consensus sectorcalls? We believethatcontainer freightrates willfallin2011 on the back of over-supply.The generalconsensus isthatthe lines havelearnttheir lessons fromth
8、epastdownturn and rates are unlikelytosee much weakness. Inthatcontextweare the onlybroker tohavea Sellrating on A.P.Moller-Maersk due tothisview. We believethat ourviews onslowingbutstill positivevolumegrowthare in-line withmarket consensus.Our positive stance oncompanies withpricingpower, such ast
9、he North American Railroads, where webelievethe marketisalsofairlypositive.Key transportideas Mostpreferred transportoperators:Expressduetothe factthatpricing haslagged thisyear due tothe contractualnature of the business (12-to-18 months). Leastpreferred transportoperators:Allthree major shipping s
10、egmentsdue tolarge supplyimbalance in2011. Withininfrastructure wearelooking for companies witha strong pricing story,good returns and catalysts.Withthatinmind weare generallypositive on Railroads (NorthAmerica and Japan), a number of airportoperators and selectedportoperators. GlobalFreightTranspor
11、t-Outlook 201130 November2010UBS 5Global Transport KeyPicksInthis section wepresent companycommentaryfor the most and least preferredstocks inthe sector for 2011. Thislistwas arrived atinconjunction withsectoranalystsfromaround the world Our currentmostand leastpreferred listincludes the following s
12、tocks:Stock RatingPT OverviewMOSTPREFERREDCSX BuyUS$80 Improving operationalperformance(with an operating ratio targetof65%by2015)plusstrongestpricing powerinUS makesCSX outtop pickamongstthe North American RailroadsFedEx BuyUS$111 Highestlevelofgearing intoExpressgrowthand intoExpresspricing.Large
13、amountofcapacitytocomeDeutschePostBuy16 Undervaluedrestructuringstory, wherestabilisationofMail plusmorenormalisedreturns inExpress/Logisticsshould resultinsharesre-rating.GearedintoEM growthandExpresspricing in2011ASUR BuyP74 Operationsare performing well,witha compelling valuation.Low interestrate
14、sare likelytoresultincorporate activityJR WestBuy420,000 The two majorprojects(the Osaka Stationredevelopmentand the mutualthrough-serviceofthe Sanyo Shinkansen withthe KyushuShinkansen line)are expectedtobegin operation inspring 2011AtlantiaBuy21.4 Appearsundervalued on allmetrics,offering IRR ofc1
15、0%.RemovalofAbertisstake overhangkeycatalystCCR BuyR$52.4 Strong returnsand high cashflow generationlikelytoleadtode-leveraging,withspecialdividends,acquisitionsand new projectsthe likelycatalystsAsciano BuyA$2.00Returnsare recoveringasvolumesreturndue torecoveringvolumes.Although containershaslostm
16、arketshare,it appears this hasstabilised. Storyrevolvesaroundde-leveragingandboostingreturns LEASTPREFERREDMoller-Maersk SellDKr41,200Largestcontainerline inthe world,withratescomingunderpressuredue togrowingcapacityChina COSCO NeutralHK$9.60 GearedintobothContainer andDry Bulk shippingcycles, where
17、prospects lookdifficult in2011OMA SellP11.50Failstoproduce consistentpositiveeconomicreturns.Operationalperformance disappointing Kintetsu CorpSell200 Railwayrevenueshaveturneddownagain inJuly-September.FY10E P/BV of2.5xremainsdemanding Source:UBS.Pricedasatmarketclose onNovember26,2010.CSX Company
18、description CSXisoneof thelargestUSfreightrailroads and operates alongthe easternseaboard tothe Midwest.Investment case We seetwo keypositives: (1) Sustainabilityof strong pricing Aftersevenyears, investors and the Street still view CSXs abilitytosustain strong pricing as a “temporaryphenomenon.” In
19、our viewitisnot. Assuming normalrailroad costinflation rateof 3%, wethink CSXcan do atleast+4% core pricing (priceincreases net of changes in fuel surcharges) growth for manyyears to come. This systematic marginexpansionis additive towhat we will see naturallyfrom operating leverage. We arecurrently
20、projecting thatCSXhits66% operating ratioby2014 (sub-70s in2011). Ourabove consensusestimates also seemtohavebeen implicitlycorroborated byCSXmanagement, withthe companycomingoutonOctober 29witha 65%2015operatingratiotarget.This is still viewed scepticallybymanyinvestors. (2) Earnings likelyto surpa
21、ss current consensus estimatesWe think the Streetisunderestimating both thesustainabilityof strong pricing and the degree of operating leverage inherent inSector: USRailroads Rating: BuyPT:US$80 Analyst:Rick PatersonGlobalFreightTransport-Outlook 201130 November2010UBS 6the CSXmodel,andthusconsensus
22、 estimates willlikelyhavetoberevisedupward. Our EPS estimates for Q4/10and2011 are $1.15 and $5.00,respectively,compared withconsensus of $1.09 and$4.70. Valuation Basedon the above webelieve CSXtradesonan unjustified discounttopeer group itisthe cheapeststock of the Class Irailsbased on forward PE.
23、 CSXcurrentlytrades at12.2x our 2011 EPS estimate versus the currentsectoraverage of 13.5xandthestocks historicaltrading range of 11-16x. CSXisalsothe cheapeststock inthe North American railgroup on 2011 EV/EBITDA(6.8xvs. 7.6x average). Given ourexpectation that Street EPSestimates for CSX will have
24、tomovehigher, weviewthisdiscountas unsustainableCatalystsThe major eventfor 2011 isCSXs Investor and FinancialAnalystconference onMay17 and18.Itis there that weexpectCSXto articulate the 65% operatingratiotargetby2015, which should shiftsentimentmateriallyhigher on the stock.We mayget“previews“onqua
25、rterlycallsand brokersponsored conferencesbetweennowandthenthat partiallyachievethe samegoal.FedEx Company description FedEx isone of the worlds largesttransportcompanies and iscomposed ofthree independentoperatingcompanies:1) FedEx Express, a globalparcelandfreightairline;2) FedEx Ground, which hau
26、ls packagesbytruck inthe USandCanada;and 3) FedEx Freight,one of the premier less-than-truckload carriers inthe US.Investment case We see three keyreasonsforbepositive:(1) OperatingLeverage.Roughlytwo-thirds of FedExs revenues are generated through itshigh fixed costbusinessunit: FedExExpress,whichi
27、s essentiallya domestic andinternational freightairline. Ifthe UBShousemacro viewiscorrectand wecontinuetoseeacontinued slowrecoveryinUSGDPand more materialgrowthoutof Asia, thisoperating leverage “kicker”shouldallowFedEx topostabove-marketEPSgrowthover the nexttwo tothree years. Separately, FedExha
28、s a loss-making domestictrucking business (FedEx Freight) thatisinthe midstof a pricing rebound,which should pivot that unit into profitabilitywithin two quarters, andFedEx Ground isa strongmarketshare taker inthe domesticground packagebusiness. (2) Expenseheadwinds dissipating. Inthe currentF2011 y
29、ear weforecast FedEx should growEPSby38% year over year, despite somematerialcostheadwinds;specifically$250minpension expense and higher aircraftmaintenance expense.These expenses wontrepeatinF2012. (3 Consensuslooks too low.The combination of points (1) and (2) above drove us to recentlyincrease ou
30、tF2012 and beyond EPS estimates for FedEx. Inparticular, wethinkthe Streethasunderestimated the amountofoperatingleverage leftinthe FedExbusiness model.Our currentF2011 EPS estimate is$5.26, which isactuallya pennyabove the companysown $4.80-$5.25 guidancerange, and our F2012estimateis$6.50comfortab
31、lyabove the consensus estimate of $6.25. Sector: USAir Freight Rating: BuyPT:US$111Analyst: Rick PatersonGlobalFreightTransport-Outlook 201130 November2010UBS 7Valuation FDXcurrentlytrades at15.6x our 2011 EPSestimate (16.1x consensus), whichcloselyapproximates its historical forwardP/E.However,with
32、still easycomparisonsandabove trendearlycycle EPSgrowththat we estimate will hit38% for Fiscal2011 and atleast24% inFiscal2012, FDXlooks historicallycheap ona PEGbasis. The stocks 5.7x 2011EV/EBITDAmultiple also looks attractive relativeto the rest of the US airfreight and logistics sector.Catalysts
33、 Given were materiallyabove consensus forF2012 weexpectF2012 companyguidanceto bethe biggest positive catalyst, which should be coincident withFQ4/11 resultson June 22. The prior quartersresults (FQ3/11) could also be apotentialcatalyston March 17. Atlantia Company description Itisone of Europes lar
34、gestquoted motorwaytollcompanies (network of3,400km). Itsmainconcession expires in2038 and itsoperations are mainlyconcentrated in Italy.Investment case Themain reason, inourview, for therecent underperformance of Atlantiadespite inflationaryexpectations andbond rallies (see ourrecent report “QE and
35、bondrally: Goodfor motorways”) isconcerns on potentialsaleof stakes heldbysomeof Atlantias shareholders namelyAabar and Abertis(who owns a 6.7% stake). We see thisas potentiallyverypositivedevelopment,and the growing interest in the namemayaccelerate the sale of Abertis stake. Valuation Looking atal
36、lvaluation metrics, Atlantiaappears deeplyundervalued. EFCFIRR of c. 9.7%, a downsidetoour conservative DCFvaluation (using 7.25% WACCand 1.4% traffic from2020 onwards) of 31%,best-in-class balance sheet. Catalysts Continuing road traffic recovery, removalof the overhang fromthe potentialdisposalof
37、Abertis stake. Inaddition, the listing of LatAmbusiness and saleof A24-25 would deconsolidatec. 70mEBITDAand 1bndebt. Deutsche Post Company description DPis the National Mail operatorinGermanyandthe worlds largest logistics company.Itisalso amajor internationalExpress operator, withparticularstrengt
38、hs inEurope, AsiaPacific and other Emerging Markets. Investment case For years DPhad poor reputation, withsurplus cash being used tomakeexpensive acquisitions and operatea heavilyloss-making USdomesticExpressbusiness. Inthe pastcouple of years managementand strategyhavechanged,withloss making busine
39、sses (including US) shutdown. WebelievetheSector: Italian Transportation Services Rating: BuyPT:21.40 Analyst: Alessandro DErmeSector: German Air Freight Rating: BuyPT:16 Analyst: Dominic EdridgeGlobalFreightTransport-Outlook 201130 November2010UBS 8operational outlook remains positive, with volumea
40、nd pricing growth in 2011.Although recentguidance was disappointing, webelievethatDPistrying tobe more conservativethaninthe past andthereis still the potential for consensusupgrades. Valuation We value DPon a sum-of-the-partsbasis. Ittrades on 10x 2011 PE versus historicalaverage of 15x andTNT on11
41、x. Catalysts Fullyear resultson 10thMarch and 2011 guidance atthe sametime. JR West Company description WestJapan Railway(JR West)has 5,024 kilometresof track covering 18 prefectures, making itthe second-largestdomestic railwaycompany,afterJREast. Transportoperations contribute 68% of consolidated o
42、perating revenues.Merchandisesales, realestate, and otheroperations bring in21%,7%,and4%.Bullettrain lines accountfor 43% of railwayrevenues, versus 40% forconventionallines inKyoto-Osaka-Kobe and 17% for locallines. JRWests main sources of earnings are its Kyoto-Osaka-Kobe lines andthe Sanyo Shinka
43、nsen. Investment case We expect JRWest to havethe strongest earnings growth of the competitorsover the nextfiveyears, due tocapacityexpansion and station re-development. Valuation ProjectedPER comes to16.4Xfor FY10E, and weexpectthe strongestprofitgrowthamong the mainrailwayfirmsover the nextfiveyea
44、rs. Factoring inlatentpropertygains of 92bn, adjusted FY10E P/BVcomes to0.74X. Our PTremains 420,000, based ona VCAM(DCF) analysis, assuming WACCof3.8%. Asciano Group Company description Ascianois Australiaslargest diversified portsand railoperator, withfour keydivisions:1) Container ports, involvin
45、g the stevedoring and land-side transportof internationalcontainers witha marketshare of justover 50%;2)Coalrail,being the second largesthaulier of exportcoalon the eastcoastof Australia, hauling c100mtpa;3) Intermodalrail,being theonlynationaloperator ofinterstaterailservices for containerised frei
46、ght, cars, and steel;and 4) Auto, bulkand general,encompassing a collection of businesses relating tothe stevedoring and transportof bulkand generalcargo, and cars. Investment case Ascianois tradingonaP/Epremiumtothe market,butwe believethe rate andlowrisk nature ofitsgrowthwarrants a premiumrating.
47、 Favourablebulk growthdrivers, “take or pay”contracts (we estimate 60% of growth is alreadysecured under take or paycontracts), and strictinternalreturn hurdles of 15-18% meanSector: Japanese Railroads Rating: BuyPT:420,000Analyst: Jun HaradaSector: Australian TransportationServices Rating: BuyPT:A$
48、2.00Analyst: Simon MitchellGlobalFreightTransport-Outlook 201130 November2010UBS 9earnings growthismore certainthan other cyclicals. We also see someupside to marketexpectations of costand capitalefficiencies inthe containerised divisions inorder toachievereasonable returns on sunk capital.Positivec
49、atalystsare bulk railcontractmomentum(eg. NML)and volumerecoveryinthe containerisedand automotive divisions (we assumeFY08 volumesare notrepeateduntilFY12).Valuation Our DCFvaluation isA$2.00 per share. Asciano iscurrentlytrading on 15xFY12EPS.Ascianos current20%premiumtothe marketis justifiedduetotherateand lowrisk natureof growthinourview. Our forecasts see20%growthinEBITAinFY11 and FY12, whichis driven bypredictable growth in the coalbusiness as well as recoveryinAscianos cyclical ports andintermodal raildivisions. Catalysts Positive catalysts
