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Outlook: Taiwan’s Container Shipping Industry Daniel Hsiao Associate Director Corporate Ratings, Taiwan Ratings Corp. Sept. 8, 2005 Characteristics of Container Shipping Industry Growing Industry Highly Cyclical Capital Intensive Fragmented Structure

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outlook taiwan s container shipping industry

Outlook: Taiwan’s Container Shipping Industry

Daniel Hsiao

Associate Director

Corporate Ratings, Taiwan Ratings Corp.

Sept. 8, 2005

characteristics of container shipping industry
Characteristics of Container Shipping Industry
  • Growing Industry
  • Highly Cyclical
  • Capital Intensive
  • Fragmented Structure
  • Low volatility than other shipping industry (Dry bulk carriers)
slide4

Unit: '000 TEUs

2005

2006

2007

2008

2009

Total

Current global capacity (Jan. 2005)

<2,500 TEUs

170

145

77

18

2

412

2,540

2,500-4,999

270

389

365

101

4

1,129

2,819

5,000-7,999

290

230

268

117

16

921

1,680

8,000+

183

525

291

161

0

1,160

123

Total

913

1,289

1,001

397

22

3,622

7,162

Source: Drewry Shipping Consultants Ltd. (March 2005).

Containership Orderbook by

Size and Scheduled Delivery Year

outlook for taiwan s operators
Outlook for Taiwan’s Operators
  • Supply: Substantially increase in 2006 and in 2007
    • Ports and inland transportation Congestion problems in the west coast of US and in Europe
  • Demand: Global economic and growth driver in China
  • Outlook for Taiwan’s Operators:
    • Impact on intra-Asia routes is limited
    • Volatility in long-haul routes (trans-Pacific routes) are higher
    • Financial strengths are strengthened
    • Capital expenditure remains high
slide6

Evergreen Marine Corp.*

Yang Ming Marine Transport Corp.

Wan Hai Lines Ltd.

Standard & Poor’s credit rating

Not rated

Not rated

BBB/Stable/--

Taiwan Ratings Corp. credit rating

Not rated

twA/Stable

twA+/Stable

(NT$ mil.)

2004

2003

2004

2003

2004

2003

Revenue

130,489

106,941

88,572

72,632

46,670

38,081

Operating income#

17,874

10,845

18,262

13,223

13,117

9,157

Net income

12,085

3,605

9,797

6,649

6,782

4,430

Cash and short-term investments

31,100

12,285

26,433

21,239

16,369

7,182

Total debt

55,343

61,930

48,205

36,128

39,481

22,109

Operating cash flow

24,593

14,507

16,691

13,527

9,847

7,028

Capital expenditure

3,350

9,884

12,891

5,313

5,069

3,695

Operating margin (%)

13.7

10.1

20.6

18.2

28.1

23.9

EBITDA/interest (x)

9.3

4.2

10.8

9.8

9.6

14.5

Funds from operations/total debt (%)

28.4

13.2

35.9

34.1

32.2

39.8

Total debt/total capital (%)

51.4

60.6

52.4

52

60.3

50.2

*Not adjusted for operating leasing ; # Before depreciation and amortization.

Peer Comparison of

Three Taiwan-based Shipping Companies

characteristics of taiwan s telecom market
Characteristics of Taiwan’s Telecom Market
  • Fixed Lines: Monopoly (per se)
  • Wireless:
    • Saturated Market
    • High Penetration Rate
    • Dominated by Three Operators
    • 3G Services and Mobile Number Portability
slide9

Local call services (%)

Domestic long distance (%)

International direct dial (%)

2002

Chunghwa Telecom Co. Ltd.

99

92

61

New start-ups

1

8

39

2003

Chunghwa Telecom Co. Ltd.

98

91

58

New start-ups

2

9

42

2004

Chunghwa Telecom Co. Ltd.

98

88

60

New start-ups

2

12

40

Market Share Comparisons Between

Chunghwa Telecom Co. Ltd. and

New Fixed-Line Start-Ups

3g friend or foe
3G: Friend or Foe?
  • 2G was revolution, 3G is just evolution.
    • Non-voice revenue accounted for only 5% of revenue
  • Demand Function of 3G = f (Quality, Content, Price)
    • Quality: Rooms to improve at the start-up phase
    • Content: 3G are joked as Girls/Games/Gambling
    • Price: 3G handset stillexpensive
  • Attitude of Major Operators:
    • Launch the service at the last moment
    • Targeted 3G subscribers only 50,000 to 120,000
mnp opportunity for new start ups
MNP: Opportunity for New Start-ups
  • Experiences from Other Markets in the Region
    • Hong Kong
    • Singapore
  • Taiwan?
    • Transfer fee
    • Three dominated operators equally share the market
    • It is an opportunity for new start-ups, but at the expense of profit
trends on taiwan s telecom industry
Trends on Taiwan’s Telecom Industry
  • Fixed Lines Market:
    • Dominated by One Incumbent
    • Potential Threat from VoIP
  • Wireless Market:
    • Low growth
    • Limited competition from new entrants
  • Outlook: Stable
slide14

Chunghwa Telecom Co. Ltd.

Far EasTone Telecommunications Co. Ltd.

Taiwan Mobile Co. Ltd.

--As at Dec. 31, 2004--

Standard & Poor's rating

AA-/Negative

BBB+/Stable/--

Not rated

Taiwan Ratings Corp. rating

twAAA/Stable

twAA/Stable

twAA/Stable

Mobile subscribers (mil.)

8.2

6.5

6.8

Mobile market share (%)

35

34

31

Total revenue (NT$ bil.)

182.6

65.5

55.2

Operating margin (%)

55.0

47.0

48.0

Net debt/capital (%)

Net cash

17.0

13.0

EBITDA interest coverage (x)

22,654.0

39.0

21.0

Funds from operations/net debt (%)

Net cash

212.0

236.0

Major Telecommunications Operators

in Taiwan