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The Rally Continues

25 November 2019 by jbchevrel

CMA CGM SA (CMA) is the #4 global shipping services provider in the world. The services they provide include vessel/container fleet management, freight delivery, logistics, cargo cruises, and other transportation services worldwide. The name is a member of iTraxx CrossOver since series s25. Today the CDS tightened -2 points to 24% upfront as they released their numbers for Q3. That is adding to the recent ~10% rally on the 5y point. Cash also gained between 2 and 3 points, between 21s and 25s. Gross earnings improved in 9 months ended Sept. 30, partly boosted by change in accounting policies. CMA revenues came up. CMA generated $7.6B in Q3-19 ($22.7B in the first 9M of 2019) up from $6.1B in Q3-18 ($17.2B in the first 9M of 2018). Gross earnings improved in 9 months ended Sept. 30, partly boosted by change in accounting policies. Excluding the IFRS 16 effect, EBITDA came $384m while median expectation was higher, between $350m and 500m. That said, the perspective of more asset disposals has offset the adj EBITDA miss. Under an agreement with China Merchants to help finance the Switzerland-based CEVA Logistics acquisition, CMA would sell stakes in 10 port terminals for $1B to Terminal Link, a FR/CN JV. The Terminal Link deal, expected to be finalized in spring, would be partly financed by a $0.5B capital increase by the JV and by a loan from China Merchants that would be converted into another capital increase after 8y. The broader shipping services sector has benefitted of a re-pricing triggered by signs of goodwill from China and the US, boding well for global trade. The sector’s growth has been eaten by trade tensions: back in October, the WTO estimated that global merchandise trade volumes would grow by +1.2% yoy in 2019.