Neptune Orient Lines (NOL)

(10-05-2012, 10:41 AM)camelking Wrote:

(10-05-2012, 08:51 AM)Temperament Wrote: NOL is always behaving in this manner of "Boom/Bust/Boom/Bust......kind of business. In fact almost all shipping businesses cannot escape this type of business cycles. People who loves and believes in this quotation “A crisis is an opportunity riding the dangerous wind” will usually thrive. For NOL as long as it remains as our Singapore's National Shipping Line", you can treat it as an "investment in crisis" IMO.
"Caveat Emptor"

By the way, almost everyone of us has faced some sort of "life crisis" and still posting in this forum means everything is still O. K. No?

Waiting for a right entry point to add on to my existing holding.....

Please, i beg you, dont touch NOL..

I totally agree that NOL will probably exist 10 years from today, temasek will pump in as much money as it needs to make sure it survives.

but what i mean is, shareholders wont make money at the price of 1.14 today. Citigroup sells at an average price of above 400USD per share (dilution accounted for) before the financial crisis. Today it is still around, but trading around 31USD as of yesterday.


http://finance.yahoo.com/echarts?s=C+Int...=undefined;

If i am the banker of NOL, i would also be scared, i would be thinking how NOL can ever pay off its debt of more than 2billionUSD... Shareholders like us should be more scared. If NOL cant earn 2 billion, it is going to do a rights issue from shareholders.. think of saizen reit, MIIF, when they are first listed... Saizen, MIIF are perhaps worth a buy now after dropping so much from their IPO and after having raised money through rights issue.

(vested in saizen & MIIF about a year ago but not anymore)

(10-05-2012, 10:44 AM)Musicwhiz Wrote: NOL certainly looks interesting from the perspective of those who wish to "catch the cycle" so to speak. But ultimately, when you cannot value a company based on earnings, and book value is being impaired even as we speak, it makes it very difficult to justify an investment thesis.

Investment would ultimately degenerate into mindless speculation once we cannot obtain a logical and objective rationale for purchasing shares in a company.

Exactly! But then by the time real value investors come in, NOL will be trading at maybe $1.8 to $2.5. i think it's historical peak price was $6 on 16 July 2007. There you see it is always something that nobody wants(because of current valuation is unfavorable) that can surprise you in the future. Again if you buy now is based on speculation. And when you buy in 2007 most probably was based on "valuation". Do you think i am right? So when you should buy?
CAVEAT EMPTOR!

Hi Temperament,

I don't exactly agree that when one buys at the "peak" in 2007 (on hindsight, of course), it is based on "valuations". With a cyclical company like NOL, and with the massive swings in profitability and losses over the years, most value investors would not even touch this with a 100-foot pole.

The only reason I can think of for justifying a purchase would be to catch the cycle, assuming as a retail investor you can time the cycle better than the analysts can!

(For info, most analysts consensus forecasts were way off the mark for NOL for 1Q 2012, to the extent that they were amazingly surprised when the losses were announced).

(10-05-2012, 11:21 AM)Musicwhiz Wrote: Hi Temperament,

I don't exactly agree that when one buys at the "peak" in 2007 (on hindsight, of course), it is based on "valuations". With a cyclical company like NOL, and with the massive swings in profitability and losses over the years, most value investors would not even touch this with a 100-foot pole.

The only reason I can think of for justifying a purchase would be to catch the cycle, assuming as a retail investor you can time the cycle better than the analysts can!

(For info, most analysts consensus forecasts were way off the mark for NOL for 1Q 2012, to the extent that they were amazingly surprised when the losses were announced).

I think it can be valued base on the average earning from a full business cycle or shipping economics cycle(~8-12 years). Then, by applying a hefty discount to the average PER ratio, you will have gotten a valuation figure. Of course, the most impt thing about catching a cyclical stock is that it must still be a Going Concern when the economy recovers.

(10-05-2012, 11:34 AM)shanrui_91 Wrote: I think it can be valued base on the average earning from a full business cycle or shipping economics cycle(~8-12 years). Then, by applying a hefty discount to the average PER ratio, you will have gotten a valuation figure. Of course, the most impt thing about catching a cyclical stock is that it must still be a Going Concern when the economy recovers.

A valid point, Shanrui! If we are able to assume business cycles are fairly similar and that NOL reacts to them in a similar fashion, in terms of their capital allocation and operations, then yes we can use an average PER based on a full business cycle.

Even then, there is the wildcard of fund raising through rights issues (or the recently scrapped idea of issuing perpetuals) which may complicate the analysis. Not to mention that NOL also pays dividends in "good years", instead of retaining more of the cash for tiding over the bad years. How do you put a value to that kind of Management decision?!?

And finally, how large is the "hefty discount" going to be? I'd say 80%.

(10-05-2012, 11:41 AM)Musicwhiz Wrote: A valid point, Shanrui! If we are able to assume business cycles are fairly similar and that NOL reacts to them in a similar fashion, in terms of their capital allocation and operations, then yes we can use an average PER based on a full business cycle.

Even then, there is the wildcard of fund raising through rights issues (or the recently scrapped idea of issuing perpetuals) which may complicate the analysis. Not to mention that NOL also pays dividends in "good years", instead of retaining more of the cash for tiding over the bad years. How do you put a value to that kind of Management decision?!?

And finally, how large is the "hefty discount" going to be? I'd say 80%.

you are right, 80% will be a good figure. Another point is that when you are finally able to catch it at 80% discount, you might find that there's some excellent business out there trading at 50% discount and giving out high dividend yield.

NOL is one of the more poorly-managed shipping companies around. high debt, high capital expenditure, and continued high losses. at current prices, it is a no go! at the current rate their cash is being consumed, they are going to go bust soon (berlian laju) if they don't secure new lines of credit. on the other hand, other shippers -- with prudent financial management -- will be able to survive this famine for the next few years.

the bottom of the shipping cycle will be more evident when shipyards' order book shrink to a trickle. some may even reposition themselves as scrapyards to find work. NOL called for the bottom in 2010 (when freight rates recovered strongly) when they made massive orders for new ships. Many other shipper also called the bottom and ordered more ships. now they are feeling the pain. which is good, because they now have no more cash (and less people willing to lend) to make more newbuild orders and further depress the market; thereby allowing the next cycle to take place. afterall, shipping is a core industry that supports the world trade and growth. and it is only a question of when, not if, the next cycle arrives. could be 3 years, could be 7 years.

if NOL has a book value of $1.00 (with its vessel valued at market price) and is projected to lose another $0.30 in at least the next two years, will it be wise to purchase shares now, if it is priced at say, $0.40? i believe that every business has a value and a price. a great discrepancy between the two is where the value investor operates.

Of course there is more than one way to look at the "value" of a company. The current book's value. The estimated future book's value. The value of the management team. The value of the owner. But the most significant value(IMO) of a company to me is can it survive in the worst of times? If can, then can it be profitable again? i have said NOL is for people who love "crisis investment" not really for value investors. It's too volatile too value properly. i don't believe you can value NOL properly.

Quote:-

John Wooden:- "It's what you learn after you know it all that counts"

Kahneman's admonition:- "The most natural way to think about a decision is not always the best way to make the decision"

Its obvious there is no talent in NOL leow. All ex-top-civil servant on its board with no real marine experience, how to survive in the toughest climate.

I think even if it drop to 80cts, there will be no takers for its equity. Its clearly bleeding very badly and mgmt seem to have no solution. If the chinese is under cutting the market, how can the conference help them? Clearly, mgmt need to make sure the conference extend further to other industry players otherwise NOL is going to collapse under its debt.

So much pessimism....