Entering text into the input field will update the search result below

China Merchants Port: Selldown Post Tariff Cuts Overdone

ALT Perspective profile picture
ALT Perspective


  • China Merchants Port is a leading port operator in China. It has presence in 8 of the top 10 container ports in China.
  • The recent selldown is unjustified, given the fundamentally positive industry the company is in.
  • There are also several share price catalysts, which could provide further upside to the conservative price target of HK$24.58.

Investment Highlights/The Opportunity

China Merchants Port Holdings Company Limited (OTCPK:CMHHY)(OTC:CMHHF) is a leading port operator in China. It has presence in 8 of the top 10 container ports in China. Its primary listing is on the Hong Kong Stock Exchange ("HKSE") under the ticker code 00144. I recommend interested readers to consider the shares listed on the HKSE due to the much higher liquidity. Its majority shareholder (74 percent ownership), the China Merchants Group, is a Chinese state-owned corporation which also has a majority stake in China Merchants Bank (OTCPK:CIHHF). At HK$18.32, it has a market capitalization of HK$60 billion (US$7.7 billion).

In 2017, China Merchants Port's combined total container throughput was 102.9 million TEUs, an increase of 5.5 percent over the prior year. Its ports in Hong Kong were the outperformers, with the throughput volume rising 12.4 percent year-on-year. It also handled a total bulk cargo volume of 505.8 million tonnes, up 10 percent from 2016.

China Merchants Port Container Terminal Volume(Source: Author's illustration using company data)

China Merchants Port Bulk Cargo Volume.jpg(Source: Author's illustration using company data)

Despite the healthy operating backdrop, the shares of China Merchants Port continued to trade at a depressed level. To make matters worse, a tariff-reduction announcement on February 1, 2018, by China's National Development and Reform Commission's ("NDRC") coupled with the broader market sell-off in early February sank its share price below HKD18, a multi-year low (see the historical price chart below). This selldown is unjustified given the fundamentally positive industry the company is in, and several share price catalysts around the corner. Nevertheless, the market correction provides investors to get into (or add to their positions) this government-backed blue-chip with a greater safety margin.

China Merchants Port historical price chart yahoo finance(Source: Yahoo Finance)

Apparent Over-reaction To The (Not So) Bad News

On February 1, 2018, China's NDRC cut the benchmark container handling tariff for import and export

This article was written by

ALT Perspective profile picture
I am honored to have been categorized as a 5-Star financial expert and ranked among the top 2% of financial bloggers on TipRanks in 2017/18. For a period, I was among the top 3 “Opinion Leaders” for Insider Ownership and Services, as well as top 5 for Long Ideas and Fund Holdings. I am an avid reader of market news and company publications with the aim of improving my investment acumen. I enjoy expressing my findings and opinions through writings. My appreciation and understanding of business strategies improved to a whole new level since completing an MBA (Distinction) from a FT100 MBA school. I have worked in companies with businesses that span multiple industries, according me with the exposure to a myriad of sectors.Check out my Author's Picks and over 190 Editor's Picks, among the highest in Seeking Alpha, if not the most.

Analyst’s Disclosure: I am/we are long CMHHF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (9)

I looked at this last week and got to the same conclusion, though to be fair I only looked at the accounts and not the tariff piece which I'll need to read up on - thanks for bringing to my attention.

I would be very interest to know your views on the relative merits of China Merchants Ports vs. Cosco Shipping Ports and also Qingdao Ports as well? They all seem to have attractive headline PEs, though I have not been through the accounts in full.

Thanks in any case for a very interesting article.
ALT Perspective profile picture
Hi pogonific, Great minds think alike. :)

I have not looked in depth at the other two for a while, so I can't give a fair comment at the moment. I am on a business trip for two weeks, so I will probably take a look at them some time later. I will be quiet on Seeking Alpha for a while. Let me know what you think meanwhile?
Well, I've spent a lot less time on this than the task deserves. However, I have reached the following conclusion. It's important to distinguish between "port operations trading" (i.e. making money by loading and unloading ships) to "trading of port operations" (i.e. making money by building/buying and selling ports). For both COSCO and Qingdao the latter of the two has been a major activity the last 4 years ending 2016 (possibly 2017 as well, but the reports are not out). For me (a time constrained value investor) the latter part is in the "too hard" box - I don't know enough about how port operations are valued.

Worse still, COSCO Ports seems to have been spun out of its parent COSCO shipping and so there are major (and I mean MAJOR) transactions between COSCO and the Ports on who knows what terms.

Qingdao has been investing like crazy (and they're probably making very good investments for all I know), but they also changed accounting standards from IFRS to mainland China I think in 2015.

So I guess for me both COSCO ports and Qingdao port fall in the too hard box. I still need to read the China Merchants reports properly - but at least they seem to be more making money from loading and unloading ships than building/buying and selling ports. Still haven't bought anything though, and all my conclusions are based off the most cursory of looks. Good luck.
ALT Perspective profile picture
I think you summarized it well. Trading of port assets is risky due to political complications. Risk on CMP would rise accordingly if they quicken their pace acquiring ports around the world.
ESLIV pe221749 profile picture
Great write up.. Do you follow China?
ALT Perspective profile picture
Hi pe221749, Thanks for your compliment. I follow Asia/China closely and have written several articles related to the region. Please feel free to check out my profile for other articles.
razztraffic profile picture
Nice job, author. Well reasoned. Thanks for bringing the company to my attention. Do you have any thoughts on the shares of OBOR at current price? I'd be interested in what you think of what Krane Shares has done with their portfolio of OBOR companies. Regards, Razz
ALT Perspective profile picture
Hi razztraffic, Thanks for your kind words. As OBOR is an ETF, I suppose generally one would look at the current price/book value vs historical to gauge whether the current price is overvalued or not. However, this does not evaluate the valuation of the numerous underlying shares. The latter is important if one is going to invest a large sum. Otherwise, the purpose of an ETF I would think is to invest passively in a reasonable theme, which this OBOR seems to be. The top 10 holdings are blue chips in the region so they are expected to be stable but they are so diversified in industry that it seems Krane is just using the OBOR theme to sell another ETF.
razztraffic profile picture
Hi, Alt Perspective, Thanks for your remarks. I can't disagree with your conclusion (that Krane is just bundling securities so as to sell another ETF) as I know little of the Krane's corporate philosophy, work ethic, etc. I do see it as an easy way to gain exposure to the companies most involved with the one belt/one road initiative. Thanks for the article and the fast reply to my post. Razz
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!


SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on CMHHF

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.