＜Research＞Daiwa Thinks Shipping Rates Still in Uptrend, Recommends OOIL & SITC

　　Daiwa commented in a research report that shipping rates are still on an uptrend, suggesting that the current environment of strong demand and tight supply remained unchanged. UN Security Council's Israeli-Hamas ceasefire resolution has not rebuilt confidence among shipping lines, which will continue to raise freight rates.

　　The broker is bullish on this high freight rate environment and recommended OOIL (00316.HK) +1.200 (+0.934%) Short selling $8.83M; Ratio 7.028% and SITC (01308.HK) +0.250 (+1.142%) Short selling $15.02M; Ratio 21.721% , both of which are rated Buy.

　　According to the report, OOIL is likely to continue experiencing tight vessel capacity in the near future. Company management emphasised that the recent consumer recovery in the US and Europe, supply chain concerns and early peak season demand continue to support bookings in the coming weeks. The effective supply of vessels is likely to be available to meet demand in 2024.

　　OOIL management is not overly concerned about an oversupply situation as the disruption of the Red Sea route will lead to an increase in ship scrapping and repair activities. Security concerns are paramount in the recovery of the Red Sea routes, and even after the UN Security Council's ceasefire resolution, the current developments are not very positive in terms of restoring confidence in the market.

　　At SITC, management is optimistic about the earnings outlook for 2024, with higher loading rates driving YoY improvements in gross margins, particularly in light of recent strong bookings. Management expected port congestion in Asia to intensify during the peak shipping season. In view of the lower freight rates demanded by customers in early 2024, SITC reduced its contract ratio compared to 2023. Meanwhile, special dividends will depend on the profitability of 2024 and the decision of the Board.

　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-06-24 16:25.)

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