According to Statista, international trade has grown tremendously over the past 15 years from a value of around $10 trillion in 2005 to a pre-pandemic level of $25 trillion in 2019.
This was possible thanks to the rapid spread of information technology, which has eliminated geographical barriers to trade and communications. Plus, the reduction or elimination of international tariffs and other legal and regulatory barriers gave a boost to the growth of multinational groups that operate on a global scale.
The maritime container transport industry is crucial to the movement of goods across regions and value chains, as it takes advantage of container ports in the export-oriented regions of industrialized countries. Over the seven years prior to the disruptions caused by the Covid-19 pandemic, the container throughput at ports worldwide grew significantly. In fact, it increased by nearly 30% to 802 million twenty-foot equivalent units (TEUs) in 2019, up from 622 million in 2012.
Cosco Shipping Ports Limited, operating as part of Cosco Shipping Holdings Co Ltd (HKSE:01919, Financial), is a global leader in container terminals and related businesses in the People’s Republic of China and internationally. It has been active for more than 25 years. The company is handling 120 million TEU per annum, operating nearly 360 docks across 36 ports worldwide.
This company's stock is not cheap, but its resilient operations, the ongoing rebound in the demand for goods and the amazing growth perspectives of the company’s assets make this investment a worthwhile buy, in my opinion.
As a result of the Covid-19 pandemic, which caused a lower TEU, total revenue decreased in 2020 to approximately $1 billion compared to the previous year's level of $1.03 billion, which also triggered lower gross and operating income. However, the net income available to common stockholders went up, hitting $347.5 million in 2020 for a 13% year over year increase. The company was dynamic on controlling operating expenses through more efficient management of its terminal assets in response to the crisis.
After the first wave of Covid, the demand for goods has rebounded, causing shipping delays as there simply aren't enough container ships to meet international shipping demnad. As a result, the throughput will improve for 2021, which should send the share price to higher levels.
Investors should pay particular attention to the assets of the company in Greece. The port of Piraeus, which is situated in a geostrategic position in the Mediterranean Sea, is among the most important ports on the globe. As a result of expansion and updating activities as well as connection to the railways, which were completed in the very recent past, the Greek port is now recording amazing annual volumes of container handling. It handled 5.4 million TEU in 2019, marking a significant leap forward compared to 800,000 Teu in 2010.
Cosco was awarded the management of harbor activities in 2010. Following this, Piraeus harbor gradually became an important commercial and transport hub for the exchange of goods between Greece and China. The existence of strong bilateral commercial relations between Greece and the second-largest economy in the world will provide a strong catalyst to the demand for transport of goods, becoming a valuable source of revenue for Cosco.
The stock traded at 13.92 Hong Kong dollars (approximately $1.79) a piece at close on Friday for a market capitalization of approximately HK$350.92 billion, a price-earnings ratio of 7.52 and a price-book ratio of 3.14.
The share price is not cheap, as it is in line with the 50-Day Moving Average of $1.79 and above the 200-Day Moving Average of $1.38. Furthermore, it is well above the middle point of the 52-week range of $0.34 to $2.25. However, I believe the stock could be worth considering in light of its growth outlook.
Disclosure: I have no positions in any securities mentioned.
