Zim files papers to start 2021 with New York shipping IPO

TradeWinds
By Eric Martin –

Fundraiser could seek $100m as Israeli operator seeks access to public equity markets.

Zim Integrated Shipping Services has filed papers to launch an initial public offering in New York, in a bid to make good on long mooted plans to go public.

The Israeli containership operator aims to list its shares on the New York Stock Exchange, where it will trade under ticker symbol ZIM, in a move that, if successful, would break a long absence of shipping IPOs on US capital markets.

The Haifa-based company did not give a timing for the IPO but pencilled in the aggregate value for the potential share sale at $100m.

Zim said that the main goal of the effort is to add to working capital and to create a public market for its shares, which would allow it to access equity markets in the future.

“We intend to use the net proceeds from this offering to support long-term growth initiatives, including investing in vessels, containers and other digital initiatives, to strengthen our capital structure, to foster financial flexibility and for general corporate purposes,” the outfit said in a draft prospectus.

The effort is backed by banks Citigroup, Goldman Sachs and Barclays as global coordinators, with Jefferies and Clarksons Platou Securities on board as joint bookrunners for the offering, according to the document.

A listing in New York would make Zim the second container liner operator listed on US stock markets, alongside Hawaii’s Matson.

International profile

Unlike Matson, which owns its vessels and is mostly focused on protected US trades, Zim brings a mostly chartered-in fleet and a global profile. It is ranked as the 10th largest operator by aggregate fleet capacity.

Its unique profile relative to other US-listed shipping stocks could work to advantage.

“The market loves logistics and hates the shippers [shipping companies], most of which erroneously get lumped into the same bucket as tankers and correlate with energy,” said J Mintzmyer, lead researcher at Value Investor’s Edge.

“I think Zim has a good chance to help break this cycle by clearly pitching the global logistics business, plus the timing is perfect as we’re in the middle of the biggest containership boom in a decade.”

Eli Glickman-led Zim, which recorded a record profit in the third quarter amid booming box rates, had made no secret of its intentions to go public. The company was reportedly eyeing London and New York as potential locations for a listing, apparently choosing latter.

“We are a global, asset-light container liner shipping company with leadership positions in niche markets where we believe we have distinct competitive advantages that allow us to maximize our market position and profitability,” Zim said in the draft prospectus filed with the US Securities and exchange commission.

The company owns just one vessel, with its remaining 69 ships brought in through charter deals, the IPO papers show.

Zim operates 66 weekly lines serving 310 ports in 80 countries. The company, which carried 2.82m teu in cargo last year, has an aggregate fleet capacity of 359,000 teu.

The company’s largest shareholder is Idan Ofer’s Kenon Holdings, which holds a 32% slice. Deutsche Bank owns 16.7% of Zim’s shares, while Greek containership owner Danaos holds 10.2%.

7 Travel Stocks That May Have More Downside Ahead

InvestOrPlace
By Josh Enomoto –

Despite warnings against mass travel issued by the Centers for Disease Control and Prevention, many Americans ignored such requests. In fact, as CNN recently reported that the Transportation Security Administration screened 1.17 million air passengers, a single-day record since the novel coronavirus pandemic began. At first glance, this appears to bode very well for travel stocks.

As the mainstream media constantly reminds us, we’re in the middle of a massive surge in new Covid-19 cases. At time of writing, the seven-day average of new daily infections is just under 160,000. Presumably, this figure will skyrocket as the uptick in travel and close contact with others raises overall vulnerability. As well, we’ve seen more than an average of 1,000 people succumb to the coronavirus over the past few weeks.

Yet that doesn’t seem to bother nearly as many people as you might assume, which initially appears a huge relief for travel stocks. Apparently, the power of cabin fever combined with Covid fatigue is enough to overcome fears of the pandemic. And sure enough, when you consider the probability of dying from SARS-CoV-2, the chances are incredibly slim.

Still, I wouldn’t go overboard on travel stocks just yet. According to data from CouponFollow.com, while Americans are eager to travel, many households have made drastic changes to their traveling methods due to Covid-19. Most notably, a majority (or 54%) plan to travel by car for the holidays this year, while plane and train travel represent 34% and 11%, respectively.

Further, Americans prefer to travel by car because of coronavirus fears, even when the travel distance increases significantly. For instance, slightly more than two-thirds of travelers prefer driving when the journey is less than 300 miles, which isn’t surprising. However, even when the distance is over 300 miles, a majority prefer cars over planes.

To give you some context, the distance from Los Angeles to Salt Lake City, Utah is about 690 miles, or nearly 11 hours of driving. From LA to Albuquerque, New Mexico is just under 800 miles, or 12-and-a-half hours of driving. If anything, it’s time to be skeptical about these travel stocks:

American Airlines (NASDAQ:AAL)
Spirit Airlines (NYSE:SAVE)
Hawaiian Holdings (NASDAQ:HA)
Park Hotels & Resorts (NYSE:PK)
Comcast (NASDAQ:CMCSA)
Ruth’s Hospitality Group (NASDAQ:RUTH)
Lyft (NASDAQ:LYFT)

To be fair, there’s a case to be made that this pandemic is on its last legs. Additionally, people eventually acclimate to their environment. That might be true. However, consumer sentiment indicates that people are shifting their purchasing behaviors and not necessarily in a manner conducive for leisure. Therefore, certain travel stocks may face downside risk before their trajectory improves.

Travel Stocks to Sell:

American Airlines (AAL)
It doesn’t take a rocket scientist to understand why the airline industry crumbled amid the coronavirus outbreak. However, as we near the dubious one-year anniversary of the global crisis, people everywhere have gradually adjusted to the new normal. In theory, this should help support American Airlines. Indeed, AAL stock has jumped over 27% in the trailing six-month period.

But is that enough to justify travel stocks exposed to the airliner industry? Of course, air travel itself will be a viable business. Unless we invent a new form of global transportation, flying remains the most convenient and often times cost effective method. However, the sector could become a game of musical chairs, not unlike what we’re seeing in the oil market. That wouldn’t bode well for AAL stock, which has a huge debt load relative to the competition.

Moreover, how would that debt load impact its ambitions post-pandemic? More than likely, the competition will be eager to aggressively push promotions and routes to claw back lost revenues. But American Airlines won’t have as much leverage than its rivals. That makes AAL stock risky, even if other travel stocks pick up based on consumers shedding Covid-19 fears.

Spirit Airlines (SAVE)
On the surface, Spirit Airlines should be one of the travel stocks to buy. If the coronavirus was just a matter of a health risk, deciding which airliner to buy might as well be a blind wager. However, because this is an economic crisis, SAVE stock stands out positively. After all, if travelers have already gotten over their fears of Covid-19, then the only hurdle they must traverse is the financial one.

Further, that’s what data from CouponFollow.com suggests: “64% of travelers said they’ve budgeted more money for travel this year than they did last year.” While that’s encouraging, on the flipside, “23% of people said they can’t afford to travel this year.” In other words, the economy for Spirit Airlines’ target demographic has gotten significantly weaker. Logically, this would likely be a headwind for SAVE stock.

Another factor to consider is the possible K-shaped economic recovery. This crisis has resulted in a bifurcated environment where the well to do have enjoyed a budget increase (i.e., no commuting), whereas lower-income households have badly struggled. If the rich represent the most air passengers, they may opt for airliners that can provide superior services.

Hawaiian Holdings (HA)
Among travel stocks, Hawaiian Holdings may actually hold the dubious distinction of garnering the most skepticism. Under any other circumstance, Hawaii is a dream destination, a literal island paradise. All other things being equal, such a place might be the ideal location for waiting out the coronavirus pandemic. Naturally, that’s exactly what Hawaiian officials realized, thus implementing strict travel protocols.

Unfortunately, Hawaii’s actions don’t occur in a vacuum. By that, I mean Hawaii’s economy is substantially tied to tourism, with the industry accounting for roughly 23% of local economic activity. But with Covid-19 fears spreading everywhere, few people wanted to up and travel to the island state. Of course, this has been devastating for HA stock.

Fundamentally, the crisis will continue to weigh disproportionately on Hawaiian. According to the Bureau of Transportation Statistics, the average passenger load factor for all American carriers was 49% in August. For Hawaiian Airlines, it was a devastating 23.7%.

Back in 2019, the average load factor for the beleaguered company was over 87%, in line with other airliners. Put another way, rising Covid-19 cases is no laughing matter for HA stock.

Park Hotels & Resorts (PK)
Another example of travel stocks that seemingly should do well in the present environment is Park Hotels & Resorts. As I stated earlier, a post-coronavirus record number of travelers hit the road and the friendly skies over Thanksgiving weekend. In theory, this should bode well for PK stock. Park Hotels & Resorts is a real-estate investment trust specializing in high-profile lodgings.

While shares have jumped higher over the trailing month — we’re talking about 60% up — prospective investors should be cautious. True, rich people are traveling but just as many are staying home. As evidence, you can look at the meteoric rise of Peloton Interactive (NASDAQ:PTON) during this Covid-19 pandemic. Yes, affluent people have access to gym memberships but they’re eschewing that for at-home exercise equipment.

In addition, the overwhelming use of personal vehicles over air travel suggests that many traveling consumers are on a budget. Plus, they might be more sensitive to Covid-19 fears; hence, the method of travel.

Therefore, hotel investments like PK stock might not fare well if coronavirus cases worsen. And the price point that the underlying lodgings command makes it out of the question for many travelers.

Comcast (CMCSA)
If I had to cast a vote for worst governor in the history of the United States, my vote would go to none other than California’s Gavin Newsom. If you like him, it’s probably because you don’t live in California. He and the activist arm of the Democrats appear hellbent on destroying the state’s economy by considering more draconian stay-at-home orders.

Of course, the rules don’t apply to Gavin Newsom. But they do apply to businesses of every size, including massive ones like Comcast. And that is going to be a tricky problem for CMCSA stock.

In the pre-Covid days, Comcast represented one of the more viable travel stocks. With prime theme parks located in almost-always sunny California (and Florida during non-hurricane seasons), CMCSA stock at the right price offered a solid anchor for your portfolio. But with California-based assets shut down, this was a shock to the system.

True, Comcast isn’t as heavily levered to theme parks as rival Disney (NYSE:DIS). But over the long term, Disney’s arguably more enviable entertainment brands provide a comparatively robust pathway to recovery. Therefore, investors ought to be careful, especially if cases worsen nationwide.

Ruth’s Hospitality Group (RUTH)
As one of the premiere restaurant companies, Ruth’s Hospitality Group generally enjoyed positive returns for three-quarters of President Trump’s administration. Thanks to record-low unemployment across most demographics, RUTH stock benefitted tremendously from this most bullish of bull markets. Sadly, not even Ruth’s wealthy clientele could save shares from the destruction seen in other travel stocks.

A New York Times article this past summer helps explain why. According to the report, the top 25% in income level reduced their spending the most during the initial onslaught of the coronavirus. This action invariably left out service workers in the cold, who depended on their patronage. Therefore, we can assume that a similar headwind impacted RUTH stock.

After all, when you’re in one of these swanky restaurants, it’s not just about the food that makes the place special. It’s a moment to be seen by others, a hallmark of great financial success. With that element gone, Ruth’s business took a hit. Moreover, with many people traveling on a budget, they’ll likely eschew Ruth’s for any old eatery.

Lyft (LYFT)
Prior to the pandemic, the ride-sharing sector represented one of the most promising travel stocks. Suddenly, anybody with a properly functioning car and a smartphone could become a taxi driver and on their terms. The creation of a new revenue channel that is conveniently available to all initially boosted interest in companies like Lyft. However, the pandemic was exactly what LYFT stock didn’t need.

As people began sheltering in place, the ride-sharing sector careened to a halt. Even after the initial recovery from the March doldrums, LYFT stock meandered aimlessly for several months. However, with the electoral victory of Joe Biden (though this is still contested, to be fair), LYFT finally enjoyed price action worthy of its ticker name.

Unfortunately, recent sessions indicate that shares may have some problems moving higher. As I pointed out earlier, consumer data indicates that many people are traveling by car, even for incredibly long distances. That’s hugely problematic for Lyft as demand for air and train travel take a backseat. Although shares may eventually recover, the current circumstances warrant caution.

5 Stocks With Recent Price Strength to Tap Market Rally

NASDAQ
By Nalak Das –

The U.S. stock market has performed fairly well year to date despite the coronavirus onslaught over the last few months. Wall Street has performed fairly well so far in 2020 after recovering impressively from the pandemic-led bear market. At present, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in positive territory year to date.

The Dow slipped to bear territory on Mar 11 and was joined by the S&P 500 and the Nasdaq Composite a day later. The downtrend continued till Mar 23 when all the three major stock indexes slumped. Wall Street has witnessed a V-shaped recovery since Mar 23 barring fluctuations in September and October, which helped it to exit the coronavirus-induced short bear market and form a new bull market.

On Dec 4, the three above-mentioned large-cap centric indexes along with the mid-cap specific S&P 400 and small-cap centric Russell 2000 and S&P 600 indexes recorded all-time highs. This impressive turnaround was predominantly driven by the astonishing growth of large-cap technology stocks together with the cyclical reopening stocks on COVID-19 vaccine hopes.

At this stage, wouldn’t it be a safer strategy to look for stocks that are winners and have the potential to gain further?

Sounds Good? Here’s How to Execute It:

One should primarily target stocks that have freshly been on a bull run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously witnessing an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.

However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Just these few criteria have narrowed down the search from over 7,700 stocks to just 14.

Here we present five out of those 14 stocks:

Aviat Networks Inc. AVNW designs, manufactures and sells an array of wireless networking products, solutions, and services in North America, Africa, the Middle East, Europe, Russia, Latin America, and the Asia Pacific.

The stock price has soared 61% in the past four weeks. The company has expected earnings growth of 95.4% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 18% over the last 30 days.

Merchants Bancorp MBIN operates as a diversified bank holding company in the United States. It operates through the Multi-family Mortgage Banking, Mortgage Warehousing, and Banking segments.

The stock price has jumped 27.1% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 33% over the last 60 days.

Honda Motor Co. Ltd. HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Life creation and Other Businesses.

The stock price has climbed 14.5% in the past four weeks. The company has expected earnings growth of 97.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 25.3% over the last 30 days.

APi Group Corp. APG provides commercial life safety solutions and industrial specialty services primarily in the United States. It operates through three segments: Safety Services, Specialty Services, and Industrial Services.

The stock price has surged 11.9% in the past four weeks. The company has expected earnings growth of 26.3% for next year. The Zacks Consensus Estimate for the current year has improved by 11.8% over the last 30 days.

Matson Inc. MATX provides ocean transportation and logistics services. Its Ocean Transportation segment offers ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska, and Guam, as well as to other island economies in Micronesia.

The stock price has gained 4.7% in the past four weeks. The company has expected earnings growth of 94.8% for the current year. The Zacks Consensus Estimate for the current year has improved 24% over the last 30 days.

American Assets Trust Inc (AAT) Chairman, CEO & President Ernest S Rady Bought $1.5 million of Shares

GuruFocus

Chairman, CEO & President of American Assets Trust Inc (30-Year Financial, Insider Trades) Ernest S Rady (insider trades) bought 50,089 shares of AAT on 12/01/2020 at an average price of $28.99 a share. The total cost of this purchase was $1.5 million.

American Assets Trust Inc is a self-administered real estate investment trust based in the United States. The company mainly invests in, operates, and develops retail, office, residential, and mixed-use properties in California, Oregon, and Hawaii. American Assets Trust Inc has a market cap of $1.79 billion; its shares were traded at around $29.67 with a P/E ratio of 47.09 and P/S ratio of 6.23. The dividend yield of American Assets Trust Inc stocks is 3.55%. American Assets Trust Inc had annual average EBITDA growth of 4.80% over the past ten years.

CEO Recent Trades:

Chairman, CEO & President, 10% Owner Ernest S Rady bought 50,089 shares of AAT stock on 12/01/2020 at the average price of $28.99. The price of the stock has increased by 2.35% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 2,194 shares of AAT stock on 11/20/2020 at the average price of $28.77. The price of the stock has increased by 3.13% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 54,994 shares of AAT stock on 11/11/2020 at the average price of $25.72. The price of the stock has increased by 15.36% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 130,000 shares of AAT stock on 11/06/2020 at the average price of $21.49. The price of the stock has increased by 38.06% since.
Chairman, CEO & President, 10% Owner Ernest S Rady bought 175,739 shares of AAT stock on 11/04/2020 at the average price of $21.64. The price of the stock has increased by 37.11% since.

Bank of Hawaii’s(NYSE:BOH) Share Price Is Down 17% Over The Past Year.

SIMPLY WALL ST

It is a pleasure to report that the Bank of Hawaii Corporation (NYSE:BOH) is up 35% in the last quarter. But in truth the last year hasn’t been good for the share price. The cold reality is that the stock has dropped 17% in one year, under-performing the market.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Bank of Hawaii had to report a 22% decline in EPS over the last year. The share price fall of 17% isn’t as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Bank of Hawaii’s earnings, revenue and cash flow.

What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bank of Hawaii, it has a TSR of -14% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective
Investors in Bank of Hawaii had a tough year, with a total loss of 14% (including dividends), against a market gain of about 22%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Bank of Hawaii better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Bank of Hawaii .

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Bank Of Hawaii Corporation: Wildly Mixed Performance

Seeking Alpha
Prepared by Stephanie –

Summary

  • Q3 was a very mixed quarter.
  • Book value improved slightly while the headline numbers were crushed.
  • Asset quality remains a concern, though it is improving.
  • Net interest margin was crushed while non-interest income fell 20%.
  • Shares are overvalued.

As our followers are aware, we have provided an overview of the key metrics of a number of regional banks in the last few weeks. This is mainly because we believe that the financials offer tremendous upside in a post-COVID world. But you have to get in ahead of the herd. For the last few months, we have seen how low interest rates have weighed heavily on banks’ operational performance, and pressure on bond yields have kept these stocks down for months despite the broader averages rebounding with authority since the March lows. However, in just the last few days following the US Presidential Election as well as news of a promising COVID-19 vaccine, bond yields are moving and the outlook for banks has improved. Overall, the banks may have spiked a little too sharply, so let them pull back before you buy. That said, the financials are a sector you should be buying for the long term in our opinion.

Here is the thing. Although provisions for loan losses have spiked this year on fears of borrowers being unable pay their loans, this risk seems to be declining in the last few weeks. This feeling is especially compounded on the belief that we are going to successfully move past COVID next year. One name that we find interesting is the Bank of Hawaii Corporation (BOH). As you can imagine, this is a regional bank in the Hawaiian Islands. The bank has recently reported earnings, and with a 4% dividend yield, we like the stock, but think there are some risks that suggest you should wait for a pullback to buy.

Revenue actually declined
We saw they have good loan activity, increased deposits, and a respectable net interest margin. Overall, the bank saw revenues decline. In Q3, the company reported a top line that fell from Q3 2019. With the present quarter’s revenues of $165.9 million, the company notched a 3.2% decrease in this metric year over year. As we have noted, performance on this line has been mixed with many other regional banks having seen flat to down revenues versus last year, while others saw increases. This was one of the many that posted declines in revenues we had seen.

Earnings follow revenues lower

The decline in revenues year over year was compounded by an increase in loan loss provisions from last year and the sequential quarter. While an increased provision from last year was expected in estimates, the results were better than expected actually. Overall, the financial results for the third quarter largely reflect current conditions at the local, national and global level. The Bank of Hawaii Corporation saw net income of $37.8 million, or $0.95 per share, compared to $52.1 million, or $1.29 per share, in the same quarter of 2019. This was above expectations actually. However, it was a decline from the sequential second quarter’s $0.98 as well. While the headline performance may spook you, keep in mind the Hawaiian economy is heavily dependent on tourism and that has been ravaged. We did note that book value improved.

Book value improves but stretched valuation noted

We like to buy quality banks when they are near or below book value. This bank stock has always traded above book value, so we keep that in mind when looking at valuation. However, the valuation is certainly concerning relative to book. While momentum is so strong right now, the stock is definitely above fair value, especially now that the stock is rocketing higher. With this move, it is expensive. The bank’s stock is $72.10 which is up nicely in the last few weeks but is now way above book value. Book value per share was $33.99 at the end of Q3 2020 compared to $33.76 at the end of Q2 2020. We love to see this movement. Still, shares are expensive when we consider tangible book value per share. Most bank stocks are valued higher than tangible book value, but here we are talking more than a 100% premium. Tangible book was $33.21 at the end of Q3 2020 compared to $32.97 at the start of the quarter. Overall, we think this is really expensive. But maybe it does not matter because it has always been at a premium. Still, we would feel much better if investors waited for the price to fall back toward $60, which is still pricey, even if the stock has always been valued like this.

Movement in loans and deposits
So, with the action in the top and bottom lines, as well as the increases in book value, we need to dig further. We should understand what is going on with loans and deposits. Here is the interesting thing. Loans and deposits are up from a year ago. But as we will see, asset quality is an issue. But the reason the company saw lower headline performance was a severely pinched net interest margin, 2.67% versus 2.83% in Q2 2020, as well as non-interest income dropping 20% from Q2 as well. Still, there was positive movement in loans and deposits.

Total loans and leases were $11.8 billion at September 30, 2020. Average total loans and leases were $11.7 billion during quarter, up slightly from the previous quarter and up 9.0% from $10.8 billion during the same quarter last year. You will note the dichotomy between commercial and consumer holdings. The commercial loan portfolio was $5.0 billion at September 30, 2020, down $5.9 million or 0.1% from June 30, 2020. However, this was up $860.1 million or 20.7% from September 30, 2019. The consumer loan portfolio was $6.8 billion at September 30, 2020, down $5.9 million or 0.1% from June 30, 2020, and up $52.2 million or 0.8% from September 30, 2019.

Consumer deposits were up nicely, while commercial deposits fell sharply. Total deposits were $17.7 billion at September 30, 2020. Average total deposits were $17.3 billion during the third quarter of 2020, up 3.5% from $16.7 billion during the previous quarter and up 12.7% from $15.3 billion during the same quarter last year. Consumer deposits increased to $8.9 billion at September 30, 2020, up $136.9 million or 1.6% from $8.8 billion at June 30, 2020 and up $1.0 billion or 12.8% from $7.9 billion at September 30, 2019.

On the other hand, commercial deposits were $7.2 billion at September 30, 2020, down $135.5 million or 1.9% from $7.3 billion at June 30, 2020 but were up $1.0 billion or 16.3% from $6.2 billion at September 30, 2019. Now, increased loan activity is great, but we have to watch asset quality metrics.

Asset quality is something you should watch each quarter
The quality of the bank’s assets has eroded during the COVID crisis. However, asset quality remained relatively stable during Q3. What killed earnings was the loan loss provisions. Provisions for credit losses did improve to $28.6 million at September 30, 2020 compared with $40.4 million at June 30, 2020 and was also nearly seven times as high as $4.25 million at September 30, 2019. However, the allowance for credit losses was $203.5 million at September 30, 2020 compared with $173.4 million at June 30, 2020.

Total non-performing assets were $18.6 million at September 30, 2020, down from $22.7 million at June 30, 2020 and $21.6 million at September 30, 2019. As a percentage of total loans and leases, including foreclosed real estate, non-performing assets were 0.16%, down from 0.19% at the end of the previous quarter. We saw good movement in charge-offs. Net loan and lease charge-offs during Q3 were actually a net recovery of $1.5 million. Loan and lease charge-offs of $2.3 million during the quarter were fully offset by recoveries of $3.8 million. This was a big improvement from Q2. In Q2, we saw net charge-offs of $5.1 million or 0.18% annualized of total average loans and leases outstanding and comprised of $8.3 million in charge-offs and recoveries of $3.2 million.

Take home here
This was a wildly mixed quarter. While loans and deposits are up, asset quality is an issue, while the ability to make money has eroded thanks to rates. However, the stock has rocketed higher on the back of an improving rate outlook. We think you fade this rally unless you are looking to simply make a momentum trade. Book value improved nicely in the quarter, but shares are overvalued.

Alexander & Baldwin Inc. REIT Holding Company (ALEX) Soars 15.51% on November 09

equities

Alexander & Baldwin Inc. REIT Holding Company (ALEX) had a good day on the market for Monday November 09 as shares jumped 15.51% to close at $14.97. About 755,180 shares traded hands on 6,513 trades for the day, compared with an average daily volume of n/a shares out of a total float of 72.35 million. After opening the trading day at $14.10, shares of Alexander & Baldwin Inc. REIT Holding Company stayed within a range of $15.45 to $14.10.

With today’s gains, Alexander & Baldwin Inc. REIT Holding Company now has a market cap of $1.08 billion. Shares of Alexander & Baldwin Inc. REIT Holding Company have been trading within a range of $23.32 and $8.32 over the last year, and it had a 50-day SMA of $n/a and a 200-day SMA of $n/a.

Alexander & Baldwin Inc operates in the real estate sector. It functions through three segments namely Commercial Real Estate, Land Operations, and Construction. The Commercial Real Estate segment owns and manages retail, industrial and office properties in Hawaii and on the Mainland, thereby accounting for most of the company’s revenue. The Land Operations segment actively manages the company’s land and real estate-related assets and makes optimum utilization of these assets. The construction segment represents the company’s sale of asphalt and concrete. It also manages asphalt related construction services on a contract basis. Geographically, the activities are carried out across the United States.

Alexander & Baldwin Inc. REIT Holding Company is based out of Honolulu, HI and has some 793 employees. Its CEO is Christopher J. Benjamin.

Maui Land & Pine suffers bigger third-quarter loss

Star Advertiser
By Andrew Gomes

A financial loss widened for Maui Land & Pineapple Co. in the third quarter largely due to COVID-19 mitigation impacts that reduced revenue for the owner of 23,000 acres of land on Maui.

Maui Land reported a $633,000 loss in the July-September period, compared with a $9,000 loss in last year’s third quarter.

The Kapalua-based company also noted that a planned sale of 46 acres at Kapalua Resort for $43.9 million did not close as expected in September because of COVID-19 restrictions. This sale, arranged in February, is now expected to close in March.

Maui Land, which quit farming pineapple in 2009 and now derives income largely from leasing land to others and operating real estate brokerage firm Kapalua Realty Co., has relied in recent years on asset sales to generate significant income. The company did not sell any assets in the recent quarter or the year-ago quarter.

Operating revenue for Maui Land dropped to $1.7 million in the third quarter from $2.7 million a year earlier.

The company said in a financial report that property rent revenue declined in large part due to tenants paying less rent that is based on a percentage of the tenant’s revenue. Maui Land received no such percentage rent in the third quarter, compared with $488,000 in the year-earlier period.

Maui Land also said it reserved $108,000 in the third quarter to cover doubtful rent collections and that it returned a potentially forgivable $246,500 federal Paycheck Protection Program loan earlier this year based on guidance from the U.S. Small Business Administration that intended for the program to help small businesses that lack significant access to capital.

As a company with publicly traded stock, Maui Land has the capability to raise capital in the stock market.

Shares of Maui Land stock closed at $10.61 Thursday, following the earnings report released Wednesday after shares closed at $10.79.

Third-quarter loss

$633,000

Year-earlier loss

Matson profit soars on goods shipped from China

Star Advertiser
By Andrew Gomes –

Hawaii’s largest ocean cargo transportation firm continued to capitalize on expanded service from China to the mainland and nearly doubled its third-quarter profit.

Matson Inc. said in a financial report released today that it earned $70.9 million in the July-September period, up 96% from a $36.2 million profit in the same period last year.

The Honolulu-based company said the primary reason for the surge was continuation of a move it made in the second quarter to more than double service from China by chartering several containerships in response to strong customer demand for personal protective equipment, cleaning products, home improvement supplies, electronics for working from home and many e-commerce goods.

Matt Cox, Matson chairman and CEO, said it is estimated that at least four to six years worth of growth for e-commerce sales is occurring this year and raising demand for shipping.

“Since the start of the pandemic in the U.S. in early March, there’s been a seismic shift in e-commerce activity, and we expect the key drivers behind the shift to remain for some time,” he said on a conference call with stock analysts.

Cox also said travel and leisure spending by consumers has largely been replaced by spending on home appliances and electronics that benefit Matson’s business.

“Demand for key household items such as dishwashers, refrigerators, washers and dryers has been so strong since the pandemic hit (that) there are key shortages in many models, and those shortages are expected to last into 2021,” he said.

Matson said its enlarged China service is operating at full capacity and carried 125% more containers in the recent quarter compared with a year earlier before expansion.

To make better use of its ships returning to China from California after delivering goods, Matson in August began stopping in Dutch Harbor, Alaska, to deliver seafood to Asia as a new “backhaul” business.

The company also said average freight rates are up for its China service in the face of reduced trans-Pacific air cargo service by passenger airlines dealing with travel bans and fewer travelers.

For its Hawaii cargo service, Matson reported only a slight decline in container volume in the third quarter compared with a year earlier — a 0.8% decrease it said was primarily related to statewide COVID-19 mitigation efforts including restrictions on tourism and a second shelter-in-place order that took effect in August while consumers continued essential spending supported in part by government aid.

In two other major markets served by Matson, Alaska and Guam, container volume in the third quarter rose 1.5% and 2.1%, respectively, compared with a year earlier.

Overall revenue for Matson rose 13% to $645.2 million in the third quarter from $572.1 million a year earlier.

Cox said Matson, which has served China for 15 years, aims to make its expanded service permanent. He said the company is investing $30 million in equipment as part of this goal.

Shares of Matson stock closed at $52.15 today before the earnings announcement. That was short of a 52-week high reached on Thursday at $53.21. Matson shares were at a 52-week low of $24.92 on May 15.