【True Insight IPO Trends】T.S. Lines Limited [02510.HK]: New Stock Introduction Investment Rating 'Neutral'
$TS LINES(02510.HK) T.S. Lines is a container shipping company focused on the Asia-Pacific region. By fleet size, the company ranked 21st among global container shipping companies as of January 1, 2024, with a market share of 0.3%, and ranked sixth among container shipping companies focused on the Asia-Pacific region in December 2023, with a market share of 2.3%. As of April 30, 2024, the company's container shipping network covers 21 countries and regions and 56 major ports worldwide.
The company performed strongly in 2021 and 2022, with revenues of $1,837.4 million and $2,443.5 million (same below) in those two years. This was mainly due to port congestion and container equipment shortages caused by the COVID-19 pandemic and geopolitical factors at the time, which led to a rapid rise in market freight rates starting in mid-2020. However, freight rates peaked in September 2021 and have since continued to decline. As a result, T.S. Lines' revenue also suffered, dropping sharply by 64.2% from $2,443.5 million in 2022 to $874.6 million. The situation did not improve much in 2024, with revenues of $318.2 million and $318.0 million for the first four months of 2023 and 2024, respectively.
The sharp decline in revenue in 2023 also led to a gross loss for the company, recording a gross loss of $33.8 million that year, with a negative gross margin of 3.9%. The company explained that the decline in average freight rates was faster than the decline in cost of sales and shipping volume. However, the company still recorded a net profit, mainly due to $48.39 million in bank interest income. Given that deposit interest rates remained high in 2023, the interest income was sufficient to offset the decline in revenue. However, after the second half of 2024, as the U.S. entered a rate-cutting cycle and deposit interest rates fell while the outlook for the shipping industry did not rebound significantly, T.S. Lines may record a net loss in 2024.
Currently, T.S. Lines' listed P/E ratio ranges from 35.9x to 46.2x, which is not low compared to the Hang Seng Index. Coupled with the company's uncertain profit prospects, we expect T.S. Lines may not be very attractive to the market, and we assign a "Neutral" rating.
IPO Details
Industry: Shipping
Listing Category: Main Board
Major Shareholder: Mr. Sharafuddin (37.49%)
Number of Shares Offered (million): 250.94
Offer Price (HKD): 3.5 – 4.5
Proceeds from Offering (HKD billion): 8.96
Number of Placement Shares (million): 225.85
Number of Public Offering Shares (million): 25.09
FY23 Net Profit (USD million): 20.7
FY23 P/E Ratio (x): 35.90 – 46.16
Total Market Cap (HKD billion): 57.78 – 74.29
Total Number of Shares Issued (New + Existing Shares) (billion): 16.51
Adjusted Net Asset Value per Share (HKD): 8.86 – 9.01
Trading Unit (shares): 1000
Sponsors: JP Morgan, China Merchants Securities International
Schedule
Registration Start Date: October 24, 2024
Registration Deadline: October 29, 2024
Announcement of Application Results: October 31, 2024
Check Return Date: November 1, 2024
Share Trading Date: November 1, 2024
Source: KGI Securities Analyst, Gong Junhua, CFA
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