PAOC Pan Ocean Container Supplies Ltd.

Company Website
http://chinapanocean.com/

According to the Department of Homeland Security, there are more than 108 million containers worldwide and it is estimated that there are approximately 200 million shipboard trips annually among seaports around the world. The maritime container shipping industry increases at an annual rate of about 10%. Almost 90% of the world’s manufactured goods are moved by container, and roughly 40% arriving by ship. In the US alone there are more than 95% of non-North American trade arrives by ship, most of which is transported in maritime shipping containers. These containers consist of large and sturdy metal boxes, typically 8 ft. wide by 8.5 ft. high and 20-40 ft. in length. Containers are moved frequently, being transferred often between ships, railroad cars and highway tractor-trailers.


Pan Ocean Container Supplies Co. Ltd

Pan Ocean Container Supplies Co. Ltd. (OTCBB: PAOC) utilizes innovative solutions to build industry-leading shipping and multipurpose containers. In order to execute a carefully engineered design concept, Pan Ocean is dedicated to manufacturing secure, green, intelligent, and lightweight containers. Recognized for its high industry standards, Pan Ocean was awarded its International Organization for Standardization (ISO) certification in January 2014. Manufacturing companies that meet ISO standards and are granted its seal of approval are regarded highly in the container manufacturing industry and to date the company offers five individualized containers.

Pan Ocean was founded in July 2012 and initiated production in July 2013. Based in Jiaxing, Zhejiang Province, Pan Ocean has become China’s leading enterprise in container manufacturing. Currently, the Company has a registered capital of $50 million dollars, with a total investment of $98 million dollars. The entire project requisition of land is 190,000 square meters (2.1M square feet), 80,000 square meters (861k square feet) of which is allocated to the building area and 11,000 square meters (118k square feet) is allocated to the container yard. The expected annual output is 180,000 TEU (twenty-foot equivalent unit).

There are four individual production plants: cold work fabrication, subassembly, main assembly and painting, respectively. Pan Ocean’s collaboration of advanced technology and expertise enables the company to produce secure, high quality, high-yield cargo containers in a cost-effective manner.




Market Opportunity

The Wall St. Journal cites that China's container ports have registered some of their biggest gains in port-handling volumes this year as a result of US economic growth and European economic recovery. After analyzing the last month of the third quarter, 2014, WSJ found that “traffic at Chinese coastal container ports, which number more than a dozen, grew 6% in September. According to analyst, Helane Becker, an increase in global GDP leads to container demand growth by two or three times. Global gross domestic product is a key indicator for global economy, which combines all individual economies worldwide. When looking at the gross domestic product / GDP of selected global regions, it is obvious that GDP is highest in industrialized countries.

Global GDP for 2014 according to Statista is at 4.13% up from 2013’s 3.6% and nearly an entire percentage point higher than that of 2012 (3.3%). These figures support the potential growth containerized trade should see into the coming year.

In addition to this, the competitive advantage for Pan Ocean stems from a successful mix of several key factors including:

• Quality-certified with worldwide distribution capabilities
• Well-established relationships with leading international shipping, leasing, and container trading companies
• Clear strategy and design concept
• Advanced equipment to produce a high-yield
• Latest welding techniques to ensure the highest quality
• Cost efficient production processes
• Situated in close proximity to major airports, ports and railways



Additional Opportunities for Pan Ocean Outside of Shipping

Pan Ocean represents a tremendous opportunity for the container manufacturing industry. In addition to a strategic alignment with major shipping, leasing, and container trading companies, PAOC has new product and expansion initiatives in the works. The new product comes in the form of shipping container homes. These eco-friendly, custom homes incorporate the latest technology of building architecture with shipping container. Therefore this ideal material will allow PAOC to build the homes efficiently and at a low cost.

More and more architects, builders, and prospective home owners are seeing the potential of shipping containers as modular building components in architecture and green prefab home building designs. The ISO shipping container has been designed to stringent standards, not only to withstand the extreme weather conditions on sea voyages, but also to withstand the stacking of 9 fully laden containers makes it an ideal construction medium.

NewGeography estimates that America will have to house some 100 million more people by 2040 so the demand for humane, affordable, sustainable housing is going to escalate dramatically in the coming years. For most Americans, particularly millenials, the demand for affordable homes near workplaces will be paramount. Shipping crates have been used in construction for thousands of years but today the old practice is being revived with entrepreneurial, innovative, outside-the-box thinking.

These containers can be cut, fabricated, re-modeled, and turned into a basic home structure for approximately $25-$27 a square foot compared to the US median list price per square foot $120 according to Zillow. This puts a whole new industry in front of shipping container manufacturers and even if global shipping were to decline dramatically, these companies could still benefit from the increased demand for affordable housing solutions.


Opportunity To Capitalize On Value Proposition

In the shipping container industry there are several market leading companies that have continued to beat estimates. Textainer Group Holdings Ltd. (TGH), which holds a current market cap of $1.98Billion, reported third-quarter earnings of $54.3 million. Earnings, adjusted for non-recurring gains, came to 88 cents per share, which beat Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 75 cents per share.

CAI International Inc. (CAP) with a current market cap of $458M, reported earnings of $16.4 million in its third quarter. Earnings, adjusted for non-recurring gains, were 69 cents per share and in line with Textainer, these results beat Wall Street expectations. The average estimate of analysts surveyed was for earnings of 66 cents per share. So for investors looking to profit on shipping container companies, the industry looks ripe for future growth in our opinion. Market participants like Textainer and CAI trade above $20 per share, currently Pan Ocean trades at $3.61/share with a market cap just slightly under $160M or about 1/3 that of CAI International.

Should things be held equal and Pan Ocean moves toward a similar market cap as CAI or even that of Textainer, price per share would be in the area of $10-$45 per share! Currently Pan Ocean shows that it could be incredibly undervalued at its current trading price with massive potential to increase in value as the company continues to progress further in the shipping container industry.