Orient Overseas (International) Limited

For Orient Overseas (International) Limited (OOIL), 1994 was a mixed bag. Operating results experienced a tremendous improvement but were offset by the investment funds’ poor performance. Operating income increased threefold to $75.6 million in 1994, from $25.6 million in 1993, after an impressive performance of the international containerized transportation division (OOCL) that contributed $55.4 million to the operating income compared to $9.2 million in 1993. OOIL’s container terminal operations contributed $10.6 million – $15.2 million in 1993 – and an additional $6.1 million came from the Wall Street Plaza, an office and commercial property located at 88 Pine Street, New York, as the remaining $3.5 million originated from other activities.

On the other hand, OOIL’s investment portfolio, hurt by the decline in bond prices from rising US interest rates – especially in the first half of the year – and the weak stock markets around the world, closed 1994 with a loss of $30 million vs. a profit of $42 million in 1993. Exceptional items had a smaller contribution in 1994, pitching in $50.7 million as opposed to $121.8 million in 1993. As a result, net income for 1994 contracted to a mere $59.1 million vs. $136.5 million in 1993, and Earnings per Share (EPS) dropped to US 10.9 cents from US 27.7 cents in 1993. However, the dividend allocated to shareholders was increased by 24% over 1993 to US 1.61 cents (HK$0.125). The decline in profits didn’t stop OOIL from becoming the best performing share in the Hong Kong stock market in 1994. Its value increased by 68% for the year, closing at HK$5.05 on December 31, 1994. The Hang Seng index declined by 32% during the same period. Obviously, OOIL’s ability to generate operating income didn’t go unnoticed or unappreciated. And, we agree that in the long run this ability is much more important than a temporary drawback due to poor investment portfolio performance.

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