Neptune Orient Lines (NOL)

[kagemusha]

Cannot see how results can be improved other than freight rate increasing or drop in fuel price.
Can sell ships if there are over abundance in the market?
Downsizing of staff does not seems to help bridge the difference between revenue and cost. (there are only that many staff to cut anyway)

Anyone can advice?

[Hill]

But I heard they have brought in some high flier ang mo expat... Maybe they restructuring? I m not sure. I am new to investing.


Not vested

[specuvestor]

NOL always have ah gong behind it - another Temasek milestone after lifting stake from less than 50% to a subsidiary when shipping cycle was running real hot during the peak of last cycle.

Seems like Temasek like momentum investing in its long term strategic process...

Whatever lah, without Temasek, NOL is also another pile of scraps... better off keep things simple and invest in ks players like Godfather Ow

Odd Lots Vested
GG

NOL is heavily in debt and cannot raise enough funds if it goes on rights. So, it is likely IPO their logistics business as it can be sold at a multiple valuation price and also allow them to retain control. After IPO, they may merge or sold the loss-making shipping business. Whichever way, as long as it benefit the long-term investors, go for it asap.

NOL is what it is today because of APL RTO back in 1997. Highly unlikely they are looking to sell the shipping business since they even sold their jewel AET to fund the shipping biz.

NOL always have ah gong behind it - another Temasek milestone after lifting stake from less than 50% to a subsidiary when shipping cycle was running real hot during the peak of last cycle.

Seems like Temasek like momentum investing in its long term strategic process...

Whatever lah, without Temasek, NOL is also another pile of scraps... better off keep things simple and invest in ks players like Godfather Ow

Odd Lots Vested
GG

NOL is heavily in debt and cannot raise enough funds if it goes on rights. So, it is likely IPO their logistics business as it can be sold at a multiple valuation price and also allow them to retain control. After IPO, they may merge or sold the loss-making shipping business. Whichever way, as long as it benefit the long-term investors, go for it asap.

NOL is like another SIA, but a ocean going one. Most nations will have their ocean national carrier and in this case NOL for Singapore.

I've spoken with a very well known veteran in this industry before. These carriers will never die off even though they might bleed most of the time. Their country will bail them out times and times again due to national interest.

Cheers!

I have to disagree here that national ship carriers are the same for national airlines. Firstly most shipping companies don't carry the country's name so little perceived prestige damage there. Secondly shipping is a function of trade so the driver is the trade in terms of regulatory, logistics etc not the shipping. Singapore generates trade using its entrepot status in a busy shipping lane.

OTOH airlines and airports drives the tourism business. In fact strategically it is a cost center to dive the tourism ecosystem. That's why LKY has to step in during the Alpha-S saga. The infrastructure failure will affect the entire chain. Whereas wherever there is trade, capitalists will get the ships there.

[VIChris]

NOL is like another SIA, but a ocean going one. Most nations will have their ocean national carrier and in this case NOL for Singapore.

I've spoken with a very well known veteran in this industry before. These carriers will never die off even though they might bleed most of the time. Their country will bail them out times and times again due to national interest.

Cheers!

I have to disagree here that national ship carriers are the same for national airlines. Firstly most shipping companies don't carry the country's name so little perceived prestige damage there. Secondly shipping is a function of trade so the driver is the trade in terms of regulatory, logistics etc not the shipping. Singapore generates trade using its entrepot status in a busy shipping lane.

OTOH airlines and airports drives the tourism business. In fact strategically it is a cost center to dive the tourism ecosystem. That's why LKY has to step in during the Alpha-S saga. The infrastructure failure will affect the entire chain. Whereas wherever there is trade, capitalists will get the ships there.

Well, a nation owns their own carrier to support their own nation’s industrial expansion. It is definitely the more important for Singapore as we are a maritime hub and most goods are transported over the sea.

Shipping is a major pillar for global trade and the world economies. They shipped more goods than what the airline could offers at a much cheaper rate.

[specuvestor]

^^^ agree but I'm saying the horse and cart is different in the dynamics of these 2 industries

[freedom]

If the logistics business can be sold above book value, just sell it. The logistics business is so small, it does not help when the liner business is bad.

Liner business actually is not that bad. Just look at Maersk Line. It is making good profit. There is no reason that NOL should not make a decent profit. Just the management need make it.

[Spidey]

Before an airline can operate international services to another country, the government must first negotiate a treaty level agreement with the destination country's government that determines number of flights, etc. Hence, SIA operates in a protected semi monopoly space. Whereas in shipping there are no such treaty, hence NOL operates in a competitive space where if your price and service are no good, people can always choose another carrier.

[freedom]

got some time to review NOL, the company. I believe that a lot of investors are not giving enough credit to it. Not that I think NOL is a good business to invest, but I think NOL is increasingly attractive with lower share price and better business outlook. And always do your own due diligence.

1. the liner business is a commodity business. Not true at all. You can't just buy a ship to run a profitable liner business. The same for NOLnot to have higher capacity to take more market share from Maesk. NOL's stronghold is intra-asia and transpacific. The intra-asia lane is still under pressure though transpacific lane has recovered. Asia-europe lane has also recovered, to 2006 level, but it is not a major business for NOL. If I am not wrong, Maesk is very strong on asia-europe lane. And NOL could not just take market shares from Maesk/MSC/CGM CMA on asia-europe lane like a commodity business. That partly explains why Maesk has profit, but NOL continues with loss.

2. on capex. If you compare the business strategy of NOL before the crisis and after the crisis, you can observe that NOL chartered most of its ships to run the liner business. After the crisis, NOL owned a lot more capacity because of its newbuild program. Most business requires capex to continue the business. So would you prefer capex during the downtime when asset price is lower(the contratian) or during the uptime when asset price is definitely high? Plus, NOL did not pay top money for bad assets.

3. On debt and cash flow. Most if not all debt incurred is for newbuild program. Though NOL has been losing money most of the past 5 years, its operating cash before capex is mostly positive. Post 2014, the capex should be very limited. It is difficult NOL to post positive free cash flow with its cost reduction.

Some investors think that a business should just fold when it could not earn a decent return. I am pretty sure that the competitors will be much happier if all business men execute such strategy. And I am quite sure that the businessmen who execute such strategy probably is very likely not be very successful in the long run unless he is the great market timer and knows exactly when to expand or fold the business. The investors can always choose to run when the business turns sour. But to expect a business owner to just fold the business is not wise, IMO.

[Layman A]

Good points.
The question is when will the overcapacity problem of the container shipping be resolved ?
We are talking about severe overcapacity here.

We have been waiting for year (and yet another year ! ) for favorable shipping rate to return, but instead of seeing the light at the end of the tunnel, what we saw is all false signals. ( Vehicle light instead of daylight ! )

http://www1.chineseshipping.com.cn/en/indices/scfi.jsp

There is only 2 ways that the market going to return to normal :

1. The shipping demand increase so much until the supply and demand is balanced.
We are seeing the opposite, world demand drop whereas shippers order more and more new ships.

2. Situation worsen until some of the players go bust !
The problem is almost all the shippers have a government behind them, and although all of them are bleeding badly, who will die first ?

Until we see some of the significant players go bust ( hopefully not NOL ) , I am currently very very pessimistic on the shipping business at the moment.

got some time to review NOL, the company. I believe that a lot of investors are not giving enough credit to it. Not that I think NOL is a good business to invest, but I think NOL is increasingly attractive with lower share price and better business outlook. And always do your own due diligence.

1. the liner business is a commodity business. Not true at all. You can't just buy a ship to run a profitable liner business. The same for NOLnot to have higher capacity to take more market share from Maesk. NOL's stronghold is intra-asia and transpacific. The intra-asia lane is still under pressure though transpacific lane has recovered. Asia-europe lane has also recovered, to 2006 level, but it is not a major business for NOL. If I am not wrong, Maesk is very strong on asia-europe lane. And NOL could not just take market shares from Maesk/MSC/CGM CMA on asia-europe lane like a commodity business. That partly explains why Maesk has profit, but NOL continues with loss.

2. on capex. If you compare the business strategy of NOL before the crisis and after the crisis, you can observe that NOL chartered most of its ships to run the liner business. After the crisis, NOL owned a lot more capacity because of its newbuild program. Most business requires capex to continue the business. So would you prefer capex during the downtime when asset price is lower(the contratian) or during the uptime when asset price is definitely high? Plus, NOL did not pay top money for bad assets.

3. On debt and cash flow. Most if not all debt incurred is for newbuild program. Though NOL has been losing money most of the past 5 years, its operating cash before capex is mostly positive. Post 2014, the capex should be very limited. It is difficult NOL to post positive free cash flow with its cost reduction.

Some investors think that a business should just fold when it could not earn a decent return. I am pretty sure that the competitors will be much happier if all business men execute such strategy. And I am quite sure that the businessmen who execute such strategy probably is very likely not be very successful in the long run unless he is the great market timer and knows exactly when to expand or fold the business. The investors can always choose to run when the business turns sour. But to expect a business owner to just fold the business is not wise, IMO.

[greengiraffe]

7 years bear and 3 years bull but enough damage is being done during the 7 years. Without Temasek, banks would have finished off NOL.

The best shipping counter to me now is Sp Ship. Ow has given Sp Ship a new lease of life after labouring quietly for the last 6 years and best part he has taken on leverage to embark on his new journey...

Vested
NOL Odd Lots
Sp Ship
Sizable
GG