Neptune Orient Lines Limited (N03.SI) is Southeast Asia’s biggest container shipper. Based in Singapore Neptune Orient Lines (NOL) has about 6,000 employees across 80 countries. The Group delivers quality services through its core business, APL. Singapore state owned investment company Temasek Holdings owns 67% of NOL.
The company became recently a takeover target by two of the world’s largest box-ship operators. Preliminary talks are undergoing with France’s CMA CGM and Denmark’s AP Moeller-Maersk on a possible sale of the company. NOL have been reducing costs, selling assets and cutting employees to stem years of losses with declining freight rates that remain under pressure due to persistent overcapacity and weak trade growth. NOL’s latest deal was the sale its profitable APL Logistics for 1.2bn USD to Kintetsu World Express early this year, a net gain of more than 887m USD for the group.
NOL operates currently 94 vessels that service more than 160 ports world-wide. The company’s linear business generated 7bn USD in revenues last year, but the group lost money for three consecutive years as freight rates fell amid the industry-wide glut of ships. In 2014 the loss widened to 251m USD from 72m USD the year before. Analysts recommend holding the stock.
The stock, currently priced at 1.055 SGD, is in a directionless market. We see some short term potential, from which we want to capitalize in our model portfolio, as the company could benefit from takeover fantasies. We will therefore open a position of 17,000 shares at close today. Nevertheless, the revenue and earning perspectives do not give much incentive to remain invested for long.
Asia Investment Signals’ Rating: ★★★☆☆
| 2011 | 2012 | 2013 | 2014 | 2015e | 2016e | |
|---|---|---|---|---|---|---|
| EPS | -18.5 | -16 | -3 | -10 | 2 | 2 |
| Change | 14% | 82% | -241% | 120% | 0% | |
| P/E current: | 4 |
