Smooth sailing for newly formed Ocean Three — Analysts
Westports Holdings Bhd (Westports), whose three largest customers have formed a new alliance called Ocean Three, may benefit from this in terms of higher market share and throughput.
According to analyst Ahmad Maghfur Usman of RHB Research Institute Sdn Bhd (RHB Research), Westports’ three largest customers – CMA CGM, China Shipping Container Lines (CSCL) and United Arab Shipping Corp (UASC) – announced on Tuesday that they are forming a new shipping alliance called Ocean Three.
The analyst highlighted that this agreement/alliance – a combination of vessel sharing, slot exchange and slot charter agreements will cover maritime trade routes Asia-Europe, Asia-Mediterranean, Transpacific and Asia-US East Coast.
“Agreements on Transatlantic trade are being finalised and will soon be announced.
“Ocean Three is still subject to Federal Maritime Commission approval and is set to be officially effective by end- 2014,” Usman added.
According to the Journal of Commerce, the new alliance will have the strongest presence in the Europe-Asia trade (estimated 20 per cent market share), ahead of transpacific trade (13 per cent) and transatlantic trade (six per cent).
It further noted that Ocean Three has been largely anticipated following the termination of the P3 alliance (where CMA CGM was one of its members) after it was rejected approval by China’s regulators.
“This new alliance makes more commercial sense, in our view, with each member contributing cargo feeds to transshipment hubs where their respective geographic strength lies,” the analyst opined.
Usman observed that CMA CGM’s dominance is in the European area while CSCL and UASC are stronger in the Asia and Middle East/Africa regions respectively.
“All three members are Westports’ largest customers, with CMA CGM contributing 36 per cent of financial year 2012 (FY12) volume while CSCL and UASC contributed 11 per cent and nine per cent respectively,” he added.
Overall, the research house noted that Ocean Three is expected to optimise the port rotations of the shipping networks of the alliance members and schedule reliability.
“This can translate into higher market share and throughput for Westports,” the analyst opined.
As such, RHB Research maintained its “buy” call and unchanged discounted cash flowderived (DCF-derived) fair value of RM3.29 per share.