Company announcement: in reporting period, the Company posted operating income of RMB 5.09B and total profit of RMB -810M; as well as net profit attributable to its parent company of RMB -780M.

    Maintaining “Neutral” rating but the Company faces de-listing risk. Irrespective of whether there will be shipping support policies, the Company will continue to face loss-making pressure. Losses are expected to be RMB 370M in 2012, relative to EPS at RMB -0.11/share and 1.31x PB against current share prices. A “Neutral” rating is maintained. We alert investors of the Company’s de-listing risk.

    Results fell short of expectations. VLCC market remained sluggish in 4Q11, which is the major reason for lower-than-expected perf ormance. In the reporting period, the Company posted operating income of RMB 5.09B, up 18.8% YoY and net profit of RMB -750M. The Company has made losses for two consecutive years after adjustments with a loss of RMB 0.22/share. In 4Q11, it had losses of RMB 220M, basically remaining flat with 2Q11 and 3Q11. The performance is below our forecast of losses of RMB 660M. In 4Q11, TCE levels of the VLCC market were below the break-even point, while shipping price growth in 4Q11 was lower YoY.

    The Company adjusted 2010 accounting items. It has made losses for two consecutive years. We alert investors of its de-listing risk. Accounting adjustments involve two aspects. 1) The Company leased back ships sold through financial leasing and kept the years of amortization for unre alized gains & losses to conform to the years of fixed asset depreciation. 2) Correct ion of fuel costs and income errors; the two items affected net profit of RMB 27.429M in 2010. Its earnings in 2010 were changed from a profit of RMB 8.835M to a loss of RMB 18.595M.

    Recently, oil shipping market prices surged due to geopolitical factors, however it will not change the structure of industry “oversupply” in the mid-term. Previously, mounting oil prices directly stimulated international demand for emergency oil reserves, marine shipping price (VICC in particular) moved up all the time. But from a standpoint of industry supply & demand stru cture, oversupply cannot be changed in the short term. According to CLARKSONS’ forecast, VLCC supply growth in 2012 is at 11.4% with demand growth of 5.2%.

    Risks are derived from deteriorating geopolitical conflicts on shipping prices.