Equity Analysis /

Regional Container Lines PCL: A supersized dividend yield, so a stubborn market not a big deal!

  • Freight rates will stand strong

  • The Russia-Ukraine war will push freight rates further

  • RCL’s next profit beat will prompt more street forecast-upsizing

Bualuang Securities
9 March 2022

Despite strong core earnings and dividend profiles, RCL’s stock price has declined by 2.5% YTD. We view this moment as a good time to take positions at a discount. Looking ahead, port congestion tied to the COVID-19 will persist for several months. And the Russia-Ukraine war will push up freight rates. Our TRADING BUY call stands!

Freight rates will stand strong

RCL has marked record high earnings for several consecutive quarters. Containerized shipping rates remain high—the YTD average Shanghai Containerized Freight Index is 3,492, up 6.9% from the 4Q21 mean, despite unfavorable seasonality. Given the strong freight rate outlook, supported by persisting port congestion, and the risk of surcharges tied to the Russia-Ukraine war, we don’t see freight rates declining materially—the market is wrong, we believe. RCL’s recent stock price fall opens a window to buy at a discount.