Dahlman Rose Upgrades The Container Leasing Industry To Buy (CAP)

Dahlman Rose is upgrading the Container Leasing industry to Buy from Hold as it believes the 2011 and 2012 outlook for growth is positive. Strong container demand at favorable rates outweighs the risk of 98% utilization rates. The cash on cash return of +14% should enable the companies to report positive earnings.

Given the outlook for populations in China, the Indian subcontinent, the Middle East and Brazil to become consumer societies, we believe the demand for containers will continue to be strong. In addition, there is a relative shortage of manufacturing capability with real barriers to entry that should continue to push prices higher.

Dahlman Rose is upgrading the industry to Buy from Hold, and is initiating coverage of the common shares of CAI International CAP with a Buy. In its view, the risk of lower utilization is more than offset by the positive cash on cash returns that are currently around 14%.