Xiamen International Port H

Xiamen Port (3378, $2.1) 12M Target $3.2 Trading BUY During the past twelve months, Xiamen Port rose 8% while Dalian Port (2880) up 56%, Tianjin Port (3382) up 147% and the HSCEI up 100%. Xiamen Port is a laggard and currently trading at the lowest PE in the sector. Xiamen Port is proceeding the disposal of its 100% interest in Haicang terminal berth #1 to the joint venture company with Hutchison Port, in which Xiamen Port has a 50% stake. Xiamen Port has been given an option to acquire the parent’s 50% stake in Songyu container terminal (a JV with Maersk). We expect the acquisition to be materialised by end-2007 or early 2008 which in turn will improve earnings outlook for 2008. Maersk’s pledge to shift its transshipment hub to Xiamen from Kaohsiung, Taiwan, on completion of the Songy terminal could expand Xiamen Port’s throughput by roughly 1mn TEUs. We expect the transshipment will begin in 2009. We rate Xiamen Port a BUY with 12-month target price of $3.20, representing 21x 2008 earnings.