Copyright notice
This Report is for the sole use of the purchaser and is not to be copied or distributed outside of the client organisation
outlook till 2020
Wednesday 11 and Thursday 12 June 2014
JW Marriott, Jakarta, Indonesia
Jason Chiang Director
About Us
Since its founding in 1970, Drewry has grown into
one of the world's most respected international
maritime research & advisory providers.
0
LONDON
DELHI
SHANGHAI
© Drewry 2014
Evaluation criteria: South East Asian container port
GOOD
POOR FAIR
Strong margins
•
Tariff levels
•
Sufficient operating margins
Transaction price
•
Price dependent on willing buyer, willing seller
•
Future trends
Outlook till 2020
Investment access
•
Does the country welcome foreign ownership?
•
Are there investment opportunities?
Container volume
•
Strong growth or captive volume
•
Competitive landscape
© Drewry 2014
Drivers: Container volume growth
Growth drivers for container volumes growth remain largely unchanged.
0.00 50.00 100.00 150.00 200.00
0 20,000 40,000 60,000 80,000
C ont ai ne r S hi ppi ng v ol um e s (m il li on T E U )
Container shipping volumes against world GDP
Organic
•
Economic growth
•
Income levels => Import
•
Manufacturing => Export
Laden
gateway
0% 20% 40% 60% 80% 198 1 198 4 198 7 199 0 199 3 199 6 199 9 200 2 200 5 200 8 201 1 C ont ai ne r tonnage t o g e ne ral carg oContainer to total general cargo tonnage ratio
Substitution
•
Containerization of general cargo
•
Key driver historically for gateway
laden containers
Laden
gateway
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 197 9 198 2 198 5 198 8 199 1 199 4 199 7 200 0 200 3 200 6 200 9 201 2 P e rce nt age of M TsPercentage of MTs
Accidental
•
Trade imbalances resulting in
more/less import/exports
Empty
containers
0.0% 10.0% 20.0% 30.0% 40.0% 197 9 198 2 198 5 198 8 199 1 199 4 199 7 200 0 200 3 200 6 200 9 201 2 % tr ansh ipm e nt Percentage Transhipment
Induced
•
Vessel upsizing => Fewer port
Revenue sources: Container port
Revenue
89% of the typical SEA terminal
operator’s
revenue is
from stevedoring. Remainder from storage and other
auxiliary services.
Stevedoring accounts for the bulk of terminal operator’s revenue.
Gateway terminals generate higher unit revenues than empty and transhipment terminals.
Tariff
While incurring similar costs to perform, gateway laden
tariffs are generally higher than empty and transhipment
tariffs.
Stevedoring 89% Non
stevedoring 11%
0.00 10.00 20.00 30.00 40.00 50.00 60.00
Gateway laden 20" Gateway empty 20" Transhipment laden 20"
S
tev
edo
ring
t
ar
if
fs per
mo
v
e (US$
)
© Drewry 2014
Historical: South East Asia port container volume
SEA port volumes grew from 34.5 million TEU in 2000 to 89.3 million TEU in 2013, a 7.6% CAGR. 40 million TEU are transhipment laden. Transhipment and empty containers accounted for 61% of total throughput in 2013.
SEA container terminal throughput, 2000-2013 (million TEU)
8.2% 8.1% 6.9% 2000-2013 Containers CAGR Empty Transhipment (laden) Gateway (laden) Total throughput 7.6% 52% 54% 56% 58% 60% 62% 64% 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
T ransh ipm ent ( laden) + E mp ty % o f t o tal V o lum e (million T E U)
Drivers: Container volume growth momentum and trends (2020)
Economy and containerization will be key growth drivers for the region.
Accidental growth: Empty volume growth to remain stable
77% 78% 79% 80% 81% 82% 83% 84% Ga te w a y ( % )
O
Organic growth: Gateway (laden) growth continues to be driven by economic growth
0 10 20 30 40 50 60
1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Ga te w a y l a den v ol um e ( m il li on T E U )
SEA GDP (trillion USD)
Substitution growth: Containerization continues to drive gateway (laden) volume growth
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% c onta iner iz a ti on (% )
Induced growth: Transhipment to remain stable as region already has high transhipment incidence
© Drewry 2014
Legend
Gateway
Transshipment 0.13
4.5 28.1
0.28
7.8 13.5
Indonesia
12.7
Vietnam
7.1
Philippines
5.7
Thailand
8.1
Myanmar
0.56
Main transhipment
hub
Gateway and domestic
hubs
Gateway and domestic
hubs Gateway
and domestic
hubs Gateway
and domestic
hubs
Outlook: South East Asia port container volume
International transhipment hubs located in Straits of Malacca along the Far East-Europe route. Indonesia, Thailand, Malaysia, Vietnam and Philippines combine for a huge 41.4 million TEU market.
Regional volume
•
International
transhipment
hubs
located along the Far East
–
Europe/Med trades. Transhipment
hubs likely remain the same as
ships upsize to 18,000 across the
shipping lines.
•
Main gateway ports of Indonesia,
Transhipment 2013-2020 CAGR 5.1%
Outlook: South East Asia port container volume
Volume projections 2013-2020: Gateway: 6.6%, transhipment 5.1%.
Container port gateway volume outlook CAGR, 2013-2020*
• Drewry projections based on economic outlook
9.7% 5.5%
6.6% 7.3% 6.0% 5.5% 3.1%
6.2%
9.2%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Brunei
Cambodia Myanmar Indonesia Malaysia Philippines Singapore Thailand Vietnam
Volume drivers
•
Manufacturing bases
:
Thailand, Indonesia, Vietnam
•
Agricultural
: Malaysia,
Philippines
•
Import dependent:
© Drewry 2014
Outlook: South East Asia port tariff
Gateway port tariffs in South East Asia range widely. Key factors include the tariff policy as well as the level of competition.
SEA container stevedore tariff gateway 20” (USD) *
* Drewry estimates from public tariff and shipping lines
0 20 40 60 80 100 120
Cambodia Indonesia Malaysia Myanmar Philippines Singapore Thailand Vietnam
Tariff drivers
•
Over competition:
Vietnam,
Thailand
•
Tariff policy
: Philippines,
Indonesia, Thailand
•
Limited competition
:
Outlook: South East Asia port EBITDA margins*
South East Asia port EBITDA margins are generally positive (exclude concessions).
Margins are derived based on estimates of tariff, volume and operating expenses. Concession payments are not included
0% 20% 40% 60% 80%
Cambodia Indonesia Malaysia Myanmar Philippines Singapore Thailand Vietnam
SEA container terminal operator EBITDA margin (%)
Margin drivers
•
Limited competition:
:
Philippines, Singapore,
Myanmar
•
Intense competition
: Vietnam
•
Improving capacity
utilization
: Thailand
•
High cost of operations:
© Drewry 2014
Outlook: South East Asia container port investment
Country outlook is positive for Philippines, Myanmar and Indonesia. Viable investment opportunities can be found in the region.
Malaysia
Country Access Volume Tariff Margin
Thailand
Philippines
Cambodia
Myanmar
Vietnam
Singapore
Indonesia
Thailand
• Foreign investment encouraged in LCB
• Industries affected by flood and political uncertainty
• Margins increasing with capacity utilization
Philippines
• ICTSI base of operations. DPW present
• Steady volume growth, mainly in Manila
• Low cost environment, gateway pricing
Cambodia
• State owned enterprises
• Captive volumes
• Margins eroded by high cost of operations
Singapore
• PSA base of operations
• More than 80% is transhipment.
• Margins healthy due to keen cost
management • Kalibaru, Cilamaya concessions Indonesia
• Strong growth.
• Healthy margins
Myanmar
• HPH present
• Mainly imports. Exports require manufacturing to take root
• Limited competition
Vietnam
• Foreign investment encouraged
• Volume growth steady
• Margins pressured due to overcapacity
Malaysia
• Limited opportunities, Westport IPO
• Captive volumes
© Drewry 2014
6.9 7.1 7.0
8.3
10.1 10.7
15.4
18.4
12.2
9.1
10.7
12.0
9.8
0.0 5.0 10.0 15.0 20.0 25.0 30.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
EV/EBIT
DA
Historical transaction: Container port EV/EBITDA
Port transactions rose to historical highs in 2007 to current 10-12X EV/EBITDA valuations. At each time phase, different investor classes were active in acquiring assets.
Initial: Terminal operator
HPH acquire ICTSI overseas
assets
PSA acquired HNN
Dubai Ports International (today's DP World)
bought CSX.
Interim: Investment fund
DPW acquired P&O ports
Investment funds became active, pushing valuations
to as high as 30X
Recent: Private equity fund
Financial performance : Container maritime assets
Ports are an attractive asset class for investors due to steady margins and returns.
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
Maersk Line Neptune Orient Line
Evergreen Hanjin Orient Overseas
Hyundai APM Terminals
DP World PSA International
ICTSI Hutchison Port Holdings
HHLA AG
Major shipping lines Major port operators
E
B
IT
D
A
margi
n
2009 2010 2011 2012
Container shipping:
High volatility
© Drewry 2014 6.7
7.5 7.1
9.2
11.3
10.8
19.5 19.6
12.0
9.7
11.9
14.0
10.3
7.1 6.8 7.0 7.5
9.0
10.7 11.2
17.2
12.3
8.5
9.6 10.1 9.4 9.2 9.3
0.0 5.0 10.0 15.0 20.0 25.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
E
V
/E
BIT
DA
Private port transactions Listed port valuations
Valuation gaps
Financial benchmarks: Port transaction
List port companies can be used as benchmarks for private transactions
7.5 7 9 7.5 10.5 12.8 18.0 12.0 9.0 11.8
10.0 10.3
7.1 6.8 7.0 7.5
9.0
10.7 11.2
17.2
12.3
8.5
9.6 10.1 9.4 9.2 9.3
0.0 5.0 10.0 15.0 20.0 25.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
E
V
/E
BIT
DA
Outlook: Port investment
Increase in US interest rates would result in higher interest payments by terminal operators with US denominated debt. Investors would have to seek alternative sources of funding for future acquisitions.
1%
3%
6%
8%
7%
6% 6% 6%
5.0% 5.0%
1.9%
0.2% 0.2% 0.1% 0.1% 0.1%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
2006 2007 2008 2009 2010 2011 2012 2013
Interest as % of revenue Fed rates
Financial crisis, Fed lower rates to absolute lows. Interest rates high,
higher use of equity
Fed indicates intention to increase rates.
Operators careful about using debt.
Increasing use of debt as interest
rates lower
Operators load up on debt with likely increase in interest
In conclusion
Asean region economies in better shape and
projected to grow strongly => Container trade
growth likely to be centered in Asia.
Opportunities for investing in Asian ports are
limited but comes with the assurance of
captive volumes. Margins remain a concern.
Careful due diligence required.
© Drewry 2014
Contact
Head Office – UK
Drewry Shipping Consultants Ltd 15-17 Christopher Street
London EC2A 2BS, United Kingdom
t: +44 (0)20 7538 0191 e: enquiries@drewry.co.uk
India Office
Drewry Maritime Services Private Limited 209 Vipul Square,
Sushant Lok-1 Gurgaon, Haryana-122002, India
t: +91 124 497 4979 e: india@drewry.co.uk
Singapore Office
Drewry Maritime Services (Asia) Pte, Ltd. 15 Hoe Chiang Road
#13-02 Tower fifteen Singapore 089316 t: +65 6220 9890
e: singapore@drewry.co.uk
Shanghai Office
555, 5th floor Standard Chartered Tower, 201 Shi Ji Avenue,
Pudong District,
Shanghai, China 200120 t: +86 (0)21 6182 6759 e: info@drewry.co.uk
