Jin Wu Financial News | According to J.P. Morgan Chase Research Report, Dongfang Overseas International (00316)'s revenue for the first quarter of this year increased 21.9% compared to the previous quarter, mainly due to the rise in comprehensive freight rates under the Red Sea situation. Also, spot freight rates have stabilized and are expected to rise. Following the decline two months after the Lunar New Year, the Shanghai Container Freight Index has seen a slight increase for two consecutive weeks. Considering OFC's operations in the second half of 2023 and the first quarter of 2024, the bank believes that although the latest performance and dividend payment decisions are not impressive, Motong believes that Orient Overseas International's valuation is still attractive. The market account ratio is 0.6 times, and the dividend ratio is about 6%.
Looking ahead, the bank sees room for a further rebound in international freight rates from overseas in the East: 1) the company is driving a new round of overall rate increases (GRI) starting May 24; 2) the peak season for Asian-European routes during the Olympics is about to begin, and the group says cargo volume is picking up; 3) global shipping capacity is limited, supply chain disruptions have intensified, and potential disputes in USEC port negotiations. The recent escalation of tension in the Middle East has added a layer of complexity and may lead to increased supply chain challenges.
The bank lowered the company's target price by 12% from HK$165 to HK$145, corresponding to 1 times the market account ratio in 2024 and a standardized return on shareholders' equity of about 10%, and the rating was “increased”.