胜狮货柜(00716) 　　Singamas issued a profit warning for 2016; however, we seesome signs of revival in short term; long term still uncertain 　　Shortage of containers and shipping lines’ attempt to avoidpaying higher prices from 2Q17 to boost near-term outlook 　　We see sequentially lower losses in 2H16 and increase our2017e profits. Increase TP to HKD0.9 (from HKD0.7) 　　What happened? On 17 November 2016 after market close, Singamas issued a profitwarning for 2016 stating that it expects a sharp increase in reported losses y-o-y to atleast USD53m (vs 2015 loss of USD2.7m). This implies a USD16m loss in 2H16. 　　A reversal of fortune? Container manufacturing sector is undergoing one of longestdown-cycles since 2011. Indeed, companies such as Singamas reported losses in 1H16compared to record profit in 2011 as container price (20ft) declined from USD2,800 in1H11 to USD1,400 in 1H16. However, things have started to improve since Septemberand we have looked in detail to see if turnaround is short term or more structural. 　　A short-term boost: We spoke with the company and analysed the 3Q16 results of USlisted container leasing companies which are key customers of container manufacturers.We believe demand and container price will remain strong in 4Q16 and 1Q17 due to thefollowing reasons: (1) Hanjin Shipping’s (117930 KS, NR, KRW856) bankruptcy haltedmovement of almost 1m TEUs and indeed inventory has declined to five year low; (2) asteady increase in steel prices, one of the major inputs; (3) an order rush until April 2017to avoid ordering water-based paints vs solvent-based paints which could push up pricesby USD100-150; and (4) higher vessel deliveries in 2017e support growth in demand. 　　Long-term outlook still weak: An accelerated order of containers in the next fourmonths means that demand could drop sharply in subsequent quarters as witnessed invessels ordering of 2015. We previously argued that container shipping consolidation(M&A) and bigger alliances could hurt box manufacturers due to improved box efficiency(see Consolidation continues: Three Japanese lines merge, 1 November 2016). Suchefficiencies can be achieved only over time as carriers need time to adjust their box fleet. 　　We expect sequentially lower losses in 2H16 vs 1H16, although we increase our 2016loss estimates to reflect the sharp drop in box production. Box prices have picked up inthe past two months since Hanjin’s bankruptcy and will fully reflect in earnings in 1Q17.Singamas could also benefit from RMB depreciation as it mainly has USD denominatedrevenues vs RMB denominated expenses. Consensus is not available. 　　Maintain Hold rating but increase TP to HKD0.9 (was HKD0.7) on higher earningsestimates. The stock is up 16% in November to date and outperformed the local index by18%. We now value the stock at 0.5x 2016e PB (vs 0.4x previously reflecting troughvaluations) to reflect the near term earnings visibility. Our target price implies 4.3%downside from the current price. We reiterate our Hold rating given our expectation of asequential rebound in 2H16-2017.