Revisiting logistics: This note looks again at logistics as we enter the Q2-09
earnings season, and we adjust our PTs. We prefer companies with strong
market shares and balance sheets, and (for Mail) a consistent cash dividend
record.
• Volumes in stable decline, PMI points to better to come, so careful
picking for operating gearing is key: We think Q2-09 will see volumes
still tracking lower yoy (albeit without further deterioration): worst in Air
(>20% down), less in Sea (-10%) and Mail. Forward indicators such as PMI
are recovering (but not yet suggestive of sustained yoy growth).
• Pricing is the key for forwarders where we cut EPS at K+N and
Panalpina: ‘Asset-light’ forwarders (with active cost savings) may escape
the worst of operating gearing downside, but there are growing signs that
customer pressure (plus marginal pricing from integrators) has seen gross
profit windfalls quickly eroded. We project H2-09 to see declining yoy
GP/Unit on volumes down yoy while cost savings still gather speed. Thus,
we have cut 09E EPS for K+N and Panalpina and see risk to DSV.
• K+N downgrade to N — debt leverage for recovery preference favours
DSV (OW): An Ocean cargo focus means we see strongest long-term
growth at K+N — but this looks ‘priced-in’ for the year, and we move our
rating to N (from OW). Deeper into recovery, DSV (OW) has debt
amplification of equity returns, and we see potential disappointment on Q2-
09 (31/07/2009) as the chance to increase a weighting.
• Asset-heavier Express and Mail networks carry (we think known) shortterm
risk and deeper recovery upside. Operating gearing on trimmed 09E
economic growth forecasts sees cuts to our TNT and DHL Express EBIT
estimates. However, demand recovery could have upside gearing if Express
pricing remains rational. On the downside, unresolved Labour issues weigh
on prospects for highly unionised Mail operations.
• Deutsche Post DHL (OW) preferred over TNT (N). We see mid-cycle
upside to both with each facing similar economic and mail (labour) issues.
We see more risk to TNT if lack of progress continues on mail labour cost
reduction plans: We find consensus investor expectations that TNT’s Mail
EBIT will remain flat yoy for 09E-10E (unlike for its peers). We estimate
that DHL Express also has greater scope to benefit from speedier economic
recovery forecast outside Europe — as well as the ‘self help’ effect of
exiting the US domestic Express in January 2009.

Table of Contents
Logistics refresh: moving K+N rating to N .................................................................3
Q2-09 profit doldrums, and a still to come volume recovery signalled by PMI..........4
Pricing — a key risk to estimates.................................................................................5
Working-day effects set to damp Mail profits in Q2-09 ..............................................7
Wage pressures in Mail, flexibility in Forwarding and Express ..................................8
More downgrades reflect still weak GDP prospects for 09E .......................................8
Valuation points and PER band analysis .............................10
Share PER banks........................................................................................................11
Deutsche Post ........................................................................12
Staying OW: +29% upside to