Neptune Orient Lines (NOL)

Chartered also was a strategic investment of Singapore. it got divested.

IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

(03-07-2012, 12:22 PM)lonewolf Wrote: IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

Hmmm, the newspapers say our govt does not have a budget deficit, if we take into account these losses in strategic investments, perhaps we do have a deficit

(03-07-2012, 12:22 PM)lonewolf Wrote: IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

if one day, Singapore port is no longer so popular, I am pretty sure that NOL would go the way of Chartered.

Chartered was an important company for Singapore to grow what it is now in the late 80s, 90s. Also it was a huge employer of locals. If Chartered could be as successful as UMC, TSMC etc and Singapore could be a technology hub like Taiwan, I am sure Chartered would not be divested like now.

(03-07-2012, 01:22 PM)money Wrote:

(03-07-2012, 12:22 PM)lonewolf Wrote: IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

Hmmm, the newspapers say our govt does not have a budget deficit, if we take into account these losses in strategic investments, perhaps we do have a deficit

Don't think so. Compare to what TooMuchSick lost in 2008/2009 fiasco, NOL lost is like a drop in the ocean. Besides i think it is a matter of time it will be profitable again. May be 3 years? 5 years? or even 2 years? Let's say the worst case 8 to 10 years. Who do you think has the capital backing to last so long? Only the PAPYS, of course. - PAPYS will back it one way or another; directly or indirectly if Papys don't want to be too obvious. Actually in my opinion NOL if it's a private company would have packed up long ago. Anyway vested 5 lots only due to switching to dividend-income-investment.-Distribution phase got no much choice. My 2 cents.

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(03-07-2012, 01:33 PM)freedom Wrote:

(03-07-2012, 12:22 PM)lonewolf Wrote: IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

if one day, Singapore port is no longer so popular, I am pretty sure that NOL would go the way of Chartered.

Chartered was an important company for Singapore to grow what it is now in the late 80s, 90s. Also it was a huge employer of locals. If Chartered could be as successful as UMC, TSMC etc and Singapore could be a technology hub like Taiwan, I am sure Chartered would not be divested like now.

Very interesting comparing Chartered to UMC & TSMC. i think the difference is UMC & TSMC are not government owned. Can someone in the know tell us why Taiwan succeeded and Sinkapore failed in Electronics Industry up till today.

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(03-07-2012, 01:45 PM)Temperament Wrote:

(03-07-2012, 01:22 PM)money Wrote:

(03-07-2012, 12:22 PM)lonewolf Wrote: IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

Hmmm, the newspapers say our govt does not have a budget deficit, if we take into account these losses in strategic investments, perhaps we do have a deficit

Don't think so. Compare to what TooMuchSick lost in 2008/2009 fiasco, NOL lost is like a drop in the ocean. Besides i think it is a matter of time it will be profitable again. May be 3 years? 5 years? or even 2 years? Let's say the worst case 8 to 10 years. Who do you think has the capital backing to last so long? Only the PAPYS, of course. - PAPYS will back it one way or another; directly or indirectly if Papys don't want to be too obvious. Actually in my opinion NOL if it's a private company would have packed up long ago. Anyway vested 5 lots only due to switching to dividend-income-investment.-Distribution phase got no much choice. My 2 cents.

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(03-07-2012, 01:33 PM)freedom Wrote:

(03-07-2012, 12:22 PM)lonewolf Wrote: IMHO you cannot really compared Charterted to NOL. One is 'just' a chip foundry while the other is a provision of shipping services. I wont even called Chartered a 'strategic investment'. Maybe the govt needed to invest into the company at that time when the 'big boy' chip companies was reluctant to invest a billion plus to set up a manufacturing plant in Spore.

NOL is really a strategic investment in the sense that probably 90% of what we consumed is imported through shipping channels. Imagine in time of geopolitical chaos and the ships from other countries stopped calling here, where would we get our goods if we dun have a 'national carrier' to move in the goods for us.

Of cos, it will probably take the scale of world war for that to happen and quite unlikely to happen. So I dun think we can blame the govt from being prepared and want to retain control of NOL in case things does goes haywire.

if one day, Singapore port is no longer so popular, I am pretty sure that NOL would go the way of Chartered.

Chartered was an important company for Singapore to grow what it is now in the late 80s, 90s. Also it was a huge employer of locals. If Chartered could be as successful as UMC, TSMC etc and Singapore could be a technology hub like Taiwan, I am sure Chartered would not be divested like now.

Very interesting comparing Chartered to UMC & TSMC. i think the difference is UMC & TSMC are not government owned. Can someone in the know tell us why Taiwan succeeded and Sinkapore failed in Electronics Industry up till today.

IMHO. i think it is partly due to our PAPYS' thinking again. PAPYS choose other paths and Sinkapore too small to have the private capital, population to be like TAIWAN to succeed in the Electronic Industry. Another words Sinkapore cannot depends on the AMFTs to transfer the latest electronic technology to us. If we want it we have to pay a price for it by our own R&D. Imagine Apple transfers their technology to us----Wait long, long. (Sorry Singlish usage)
This is my layman view.
What's your professional view?

(03-07-2012, 09:17 AM)Temperament Wrote: Let's see how long it takes for NOL to turn around this time or finally NOL joins the Davy Jones' Lockers. i don't think so Papys will allow it to happens.
My 2 cents.

IMHO, NOL is in such bad shape precisely because of its majority shareholder.

CEO is a former SAF general. CFO is a politician (literally). If you read announcements posted on SGX, you can see all the shipping veterans have been leaving one after another, leaving political appointees to steer the ship.

About 10 years ago, Temasek raised a few eyebrows when it even sacked the CEO who came from Maersk and was quite well respected in the industry.

Philips has speculated that MCT and FCOT may be interested in acquiring NOL building. The synergy for MCT will be obvious for it expand its ARC which is just next door. But I always thought that MCT was waiting to acquire MBC further down the road and may not be too interested in the older NOL building.

FCOT is in the process of selling Keypoint and this may be a good opportunity for them to acquire a good asset in an area which they also have some interest in.

Both MCT and FCOT have assets in that neck of the woods, as well as pipeline assets from respective sponsors in the vicinity. Both trade at implied yields of 6.3% and have very high gearing.

At the estimated rental psf and lower end of NOL's selling price range (from analyst in article above), the gross rental yield is 4.8%.

Hence will be tough for MCT or FCOT to justify an yield accretive acquisition. Unless NOL takes a leaf from FEO or JTC and sells a 30 year lease on the freehold building?

A positive report by OCBC Securities,

LOWER FUEL PRICES, HIGHER FREIGHT RATES
• Bunker fuel prices down 11% QoQ
• SCFI up 31% QoQ
• Better allocation of capital; cost savings

Bunker fuel prices are finally down
Bloomberg’s 380 Centistoke Bunker Fuel Spot Price Singapore Index
(BUNKSI38 Index) is currently trading at 9% below the average
bunker fuel prices in 2Q12, which is in turn 11% lower QoQ than in
1Q12. After staying stubbornly high for about a year, bunker fuel
prices have finally come off along with the fall in crude oil prices,
providing the beleaguered container shipping sector a much needed
relief.

Higher freight rates should spell turnaround
Moving in the opposite direction, the Shanghai (Export) Containerised
Freight Index (SCFI) in 2Q12 averaged 31% higher QoQ, after a 21%
gain in 1Q12. Shipping consultants Drewry this week said shipping
liners’ successful rate hikes in major global trade lanes meant most
liners are now profitable. And the successful rate hikes are the result
of shipping liners’ collective discipline in managing container shipping
capacity. For the rest of 2012, capacity management remains the key
to shipping liners’ profitability. While eastbound transpacific shipping
demand remains strong, the outlook for Asia-Europe routes is still
bleak and is unlikely to see a strong peak shipping season this year.

Better allocation of capital and cost savings
Neptune Orient Lines (NOL) this week said it intends to sell its
Singapore headquarters building along Alexandra Road so as to
release capital for strategic investment. NOL said it has not decided
on a reserved price, but media reports say the 29-year old office
building is worth ~S$400m. The proposed sale, if successful, will allow
NOL to better allocate its capital in its core business of container
shipping and logistics. In addition, the Journal of Commerce reported
that NOL is in the process or has plans to lay off up to 400 employees
worldwide, as part of its Efficiency Leadership Programme to achieve
cost savings of as much as US$500m this year.

Maintain BUY
We maintain our fair value estimate of S$1.38/share and BUY rating
on NOL.

<Not Vested>

*For the full article, please visit the website.

A legitimiate reason to invest in NOL could be - looking for a significant discount to NAV and waiting for the cyclical upturn?

The Straits Times
www.straitstimes.com
Published on Aug 09, 2012
Firm suffers 6th straight quarterly loss

By Yasmine Yahya

THE sale of old vessels and a series of one-off costs related to the container shipping firm's restructuring sent Neptune Orient Lines (NOL) to its sixth straight quarterly loss.

Its net loss of US$118 million (S$145 million) in the second quarter deepens the US$57 million sea of red ink it racked up in the same period last year.

At least it is not as bad as the US$254 million loss it made in the first quarter of this year.

NOL attributed the loss to some one-time charges of US$112 million for organisational restructuring, done in May and June, and the sale of obsolete vessels.

"The one-time charges were difficult but necessary," said chief executive Ng Yat Chung.

"We need a more efficient organisation and a more modern, cost-competitive fleet to deal with the oversupply situation in the container shipping industry."

NOL said that without the charges, the second quarter net loss would have been US$6 million.

Revenue for the three months to June 30 increased 8 per cent to US$2.3 billion compared with the same period a year ago.

The company added that it achieved US$225 million in expense reductions in the first half of the year, with a full-year goal of US$500 million.

Improved fuel efficiency accounted for much of the cost savings. Fuel use was reduced by 7 per cent in the first half of 2012 from a year ago in spite of an increase in cargo volume.

The cost-cutting programme, along with improved freight rates, helped to boost NOL's core earnings before interest and taxes. This now stands at US$16 million, reversing a loss of US$41 million posted in the same period last year.

NOL's loss per share for the second quarter is 4.57 US cents, compared with a loss per share of 2.21 US cents year on year.

Its net asset value at the end of June was 86 US cents per share, down from US$1.01 per share at the end of December.

NOL's container shipping line, APL, reported second-quarter core earnings before interest and taxes of US$7 million, the first time since the fourth quarter of 2010 that the shipping business has been profitable. This was due to improved freight rates and cost savings.

The company cut costs for moving empty containers back to major export centres by US$19 million in the first half.

"Market conditions improved in the second quarter but just as important were the steps we took to improve efficiency," said APL president Kenneth Glenn.

"We expect further improvement as we continue to bring fuel-efficient ships into the fleet and optimise our network."

APL Logistics, NOL's supply chain management business, said second-quarter core earnings before interest and taxes fell 25 per cent from a year ago to US$9 million.

This was because of investments that the firm made to improve its technology products and commercial infrastructure.
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