Neptune Orient Lines (NOL)

[kazukirai]

When i invest, the first question i always ask myself is: How likely is this company to be around in 5 years time; in 10 years time? Then i invest accordingly. Some counters are for dividends and some growth as bonus. Some are cyclical stocks like NOL for capital gain. If you ride the cycle correctly, you can have 2 times or even more ROI. i am only very afraid if Papaya wants to downsize or even outsource National Shipping to FTS. That's why i gave it a miss in 2008/2009 cycle. i only have 5 lots.
On record, NOL is one of my best ROI till today.

Hi Uncle Temperament,

Assuming National Shipping isn't outsourced, would NOL be a good choice to ride the cycle in shipping once more?

I don't know much about the shipping industry but I'm guessing that NOL today isn't the NOL is used to be. For better or worse, that is the question.

[Temperament]

As far as cyclical stocks are concerned, if you ride the cycle quite well, you will be well rewarded. Just look at 2008/2009 cycle. This was one of the the shortest cycle for NOL. So for many stocks too. We are usually surprised by when the cycle starts and the cycle ends. We can not really predict the cycle. That's why i say you must have deep pockets and patience. We can only ride the cycle after commitment. If i ride 2008/2009 NOL cycle, i should be rewarded with 1.5-2.0 ROI. i chickened out. i switch to "dividend income investment".

[Jared Seah]

kazukirai ,

What Temperament says is true as I was there too. NOL in it's previous "crisis" of red ink and CEO departure, went all the way down to 50 cents. And when it recovered to the next peak shipping cycle, it shot up all the way to $5.00 - A ten bagger over 2-3 years!

No, I didn't catch it. That's the power of playing with cyclical stocks - but its not for those with weak stomachs.

I made a loss in fact. Silly me, I shorted NOL at $2.50 mid cycle....

That trade exposed my lack of knowledge in the shipping industry - and I am working in Suppy Chain for crying out loud!?

I thought I knew; then realise I know not! LOL!

But by taking responsibility for my own mistake, I'll be ready for the next upturn in the shipping industry.

Losing a battle does not equate to losing the war. What doesn't kill me can only make me stronger. (Yes, I believe in cheerleading my own self!)

[karlmarx]

nol should continue to see red for the next 4 or so quarters. they might not have enough cash to sustain more losses after that. we should be seeing some form of cash-raising exercise soon. given the present freight rates, it is quite clear that it will take quite some time -- perhaps at least 18 months -- for container shipping to get back in the black.

i'm not an electronics expert, but i don't find nol comparable to csm. i have no doubts that transportation of manufactured goods will still be done through container ships, 10 years from now. nobody can say the same for tech. memory chip (RAM) manufacturers are suffering now that there are more apple (which uses less ram) users, and less PC users; who would've thought?! at some point, the orders for new ships will slow to a trickle, given the losses ship owners are taking now. the ship supply-demand imbalance will work itself out and freight rates will be profitable once again. even if nol is sold to some bigger player, as some have suggested, the price will not be far from 1 p/b.

if and when nol becomes cheap enough, say 0.5 p/b, i will be interested.

[cookieguy]

As far as cyclical stocks are concerned, if you ride the cycle quite well, you will be well rewarded. Just look at 2008/2009 cycle. This was one of the the shortest cycle for NOL. So for many stocks too. We are usually surprised by when the cycle starts and the cycle ends. We can not really predict the cycle. That's why i say you must have deep pockets and patience. We can only ride the cycle after commitment. If i ride 2008/2009 NOL cycle, i should be rewarded with 1.5-2.0 ROI. i chickened out. i switch to "dividend income investment".

Uncle Temperament, you have the same thoughts as me. I am vested primarily due to the cycle troughs and peaks. The ROI is high if we play our cards right.

If you do not get out from the cycle fast, you will have to bear the cyclical risk. We have a "mini peak" in 2010 as seen in Shanghai containerized index and the fact that NOL turn to black from red at one instance. Hope for the next wave of cycle uptrend.

On the negative, there are plenty. Some of which is the chance of consolidation, downsizing and some of us have rightfully pointed out "chartered semi-con" incident.

At the moment, we have to wait till the storm subsidies. My only concern is the high opportunity of rights issue that could ultimately dilute current shareholders' value.

Also, it will be very interesting to attend their AGM and see the drama

Because I am sure many retail investors are duly unhappy.

---

Sadly...these carriers are chasing market shares (thus buying more ships) than profitability and now going into a crisis of overcapcity and falling demand.

They have no choice unless all of them agreed to remain status quo.
In the last downturn, one of the shipping line reduce capex and end up losing part of its market share.
Therefore this time round, nobody 'dare' to reduce capex for the fear of been squeeze out of the market.
The only way out is to see who has deeper pockets and can outlast, outplay their competitors. Recently, one of the shipping line in Malaysia has throw in the towel and this is good news for the rest of the players.
Until there is further consolidation in the industry, shipping lines will continue to bled unless there is a sudden upward in the global economy which is unlikely for the next few quarters.

So in the meantime, sit tight and see how the drama unfold.
Like what Temperament has advocated, Timing and Understanding of the shipping cycle is paramount important if you want to invest in this stock.

I agree....that's why sad case, cut-throat battle in the high seas

[Musicwhiz]

Business Times - 23 Feb 2012

NOL suffers bloodbath, unveils US$500m cost cuts

Q4 sinks US$320m into the red, full-year loss at US$478m

By LYNN KAN

(SINGAPORE) Neptune Orient Lines' 'disappointing' set of full-year and final quarter losses led its new chief to declare a US$500 million cost-cutting programme at the shipping and logistics group.

Collapsed freight rates and high energy costs that battered its container shipping business pushed NOL into losses for the full year totalling US$478 million, from profits of US$461 million a year ago.

For the final quarter ended Dec 31, 2011, NOL's losses were US$320 million, compared to a net profit of US$177 million in the year-ago period.

Revenue for Q4 stumbled 13 per cent to US$2.4 billion from US$2.8 billion. Topline for fiscal 2011 declined 2 per cent to US$9.2 billion from US$9.4 billion previously.

Losses per share for NOL for the fourth quarter and full year were 12.4 cents and 18.5 cents, respectively.

Said Ng Yat Chung, the new group CEO who took over last October: 'The liner business grew volumes and made strides in cost efficiencies, but these benefits were ultimately more than offset by industry overcapacity which dampened rates, and the much higher fuel prices.'

Mr Ng yesterday said his immediate priority was to 'improve the competitiveness of the liner business and to grow the logistics business', which unlike its container shipping arm posted profits.

NOL has set itself the task of achieving US$500 million in cost savings in FY2012 alone, of which about 20-30 per cent is reserved for reducing fuel consumption.

President of APL, NOL's container shipping arm, Kenneth Glenn said its fuel consumption review would look into 'how we run our vessel network, how we purchase fuel, how we utilise our vessel assets.'

'We recognise that it's a difficult target building off quite a few consecutive years where we've achieved quite significant cost cuts through things like slow-steaming and relocating from high-cost to lower-cost areas,' said Mr Ng.

Although NOL, like many other major container lines, has announced freight rate hikes on major trade lanes to improve earnings, Mr Ng does not believe the hikes to be the panacea for depressed earnings in the container shipping industry.

'I hope so but I don't count on it,' said Mr Ng yesterday about whether the rate hikes could revive the industry. 'Rates will be wherever the rates are. What's important for us is to improve our competition position relative to others.'

APL will start charging US$750 more per twenty-foot box on Asia-Europe routes starting March 1.

While NOL's container shipping business was a gory scene, it was a different story altogether at its logistics business.

APL Logistics posted record and full year core earnings before interest and tax of US$69 million, which was up 6 per cent from the US$65 million last year. Its revenue also set a new high, gaining 12 per cent to US$1.4 billion from US$1.26 billion last year.

Mr Ng rued that APL Logistic' slice of the business was at the moment too small to overcome the slump experienced at APL.

To 'back the winner', he said investment into technology, human resource and commercial infrastructure would continue. Mr Ng hopes to double APL Logistics' current 15 per cent share group revenue to about 30-40 per cent in the next 2-3 years.

As NOL's annual dividend policy is to pay 20 per cent of net profits after tax and it ended the year in the red, it declared no final dividend for the year.

NOL fell six cents to end at $1.425 yesterday.

[pianist]

recently i went to the alexandra place near nol to eat and noted there were many foreign executives wearing nol staff passes..

[PeterSoh]

I live 2 bus stops away from NOL >.< There are loads of foreigners around the area of pasir panjang now. Probably due to being close to mapletree business city and all.

[Temperament]

NOL is getting interesting. It's price drop to the latest low $1.26 after the latest report, yesterday. i am still watching. Vested 5 lots. i dared not buy even at $1-$1.10. I am really old already; when one grows older and older one usually loses some bone mass gradually before you know it. When i first started, i was very daring(Boh Kiasi) . Ha! Ha! That's the advantage of "Newbies" in any undertaking. This reminds me of a funny slogan i used to see displayed on vehicles: "Overtakers be careful of Undertakers". i don't see this anymore for a long time already. i wonder is this slogan applicable to newbies investors?

[Musicwhiz]

NOL is getting interesting. It's price drop to the latest low $1.26 after the latest report, yesterday. i am still watching. Vested 5 lots. i dared not buy even at $1-$1.10. I am really old already; when one grows older and older one usually loses some bone mass gradually before you know it. When i first started, i was very daring(Boh Kiasi) . Ha! Ha! That's the advantage of "Newbies" in any undertaking. This reminds me of a funny slogan i used to see displayed on vehicles: "Overtakers be careful of Undertakers". i don't see this anymore for a long time already. i wonder is this slogan applicable to newbies investors?

Looking at FY 2011 results, there was significant cash burn. Cash balance is about $227.6 million, while capex for FY 2011 was about $1.49 billion.

A cash call would not be unexpected.

Just my 2-cents.

(Not Vested)