Neptune Orient Lines (NOL SP) HOLD
Price/Tgt: S$1.045 / S$1.06 Mkt Cap: US$1,910.8m 52-wk avg daily value: US$5.6m 1-Yr Hi/Lo: S$1.20/S$0.74
CMA CGM, Maersk in Talks to Buy Singapore's Neptune Orient Lines
Analysts: Foo Zhiwei Tel: (65) 6590 6626
What's New?
- Bloomberg News reported that French carrier CMA-CGM had made a preliminary offer for NOL.
- AP Moeller -Maersk (Maersk) also highlighted to be in discussions for NOL.
- Link: http://www.bloomberg.com/news/articles/2015-11-06/cma-cgm-said-in-talks-to-buy-singapore-shipper-neptune-orient
Our Take
- According to a foreign bank report, CMA-CGM's bid was apparently S$1.50 per share, which was rejected by Temasek.
- In the same report, it was highlighted that Temasek's asking price was said to be S$3.00 per share.
- NOL's book value of S$1.36 per share (as of 3Q15) does not take into account the fall in book value of its vessels: market prices for container ships have fallen by at least 20%. Assuming a 20% decline in its vessels' book value of US$4.7b would imply a revalued book value of S$0.85 per share. As such, the high premium demanded by Temasek makes no commercial sense, on top of the industry slump and NOL's poor earnings.
- Maersk had in October issued a profit warning for FY15. A few week later, it had announced reductions in capacity, a 4,000 job cut and deferment of new vessel purchases to cope with the worsening industry outlook. As such, we think it is unlikely that Maersk will be making an offer for NOL.
- Any eventual offer would be months down the road as the process is still in the preliminary stages.
- We do not discount the possibility of Temasek accepting a lower offer despite the rumored rejection at S$1.50.
Valuation/ Recommendation
Our current recommendation is a HOLD, with target price of S$1.06
Zhiwei Foo
Equity Research
UOB Kay Hian (Singapore) Pte Ltd
8 Anthony Road, Singapore 229957
Tel: +65 6535 6868
Dir: +65 6590 6626
E-mail: zhiwei@uobkayhian.com
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