The Importance of Self Preservation

In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading

Written by: carisk | Categories: Asia, Equity | December 31st, 2009 | Add a Comment

NOL Rights Issue

With the strong support from state-owned Temasek Holdings, Neptune Oriental Lines (“NOL”) announced on Monday that its USD 985 million rights issue has been fully taken up. Looking closer at the numbers, over 97% of the total rights shares were subscribed by the existing shareholders (including Temasek), and the remaining will be allocated to shareholders who had applied for additional rights shares. The excess applications of 81 million shares represent 7.3% of the total rights issue or 2.58 times of the rights shares that were previously not taken up. NOL says preference will be given to the rounding of odd lots, and the Directors and substantial shareholders (including Temasek) will rank last in priority. The success of this massive offering will not be possible if not for Temasek’s commitment in underwriting the entire rights issue. DBS, HSBC, JP Morgan and Morgan Stanley were the lead managers of this issue.

In the latest report on NOL, J.P. Morgan says there is “limited downside to NOL” due less concerns about its balance sheet risks following its recent rights issue but there is better value in OOIL given the former’s cheaper valuations and longer term upside from its property development business in China.

Written by: carisk | Categories: Asia, Equity | July 16th, 2009 | Add a Comment

Sparks Fly Between NOL and TUI

The Wall Street Journal this week reported that NOL and Hapag-Lloyd parent TUI have retained JP Morgan and Deutsche Bank, respectively, to advise on a possible tie-up that would create one of the world’s largest container shipping enterprises. Such a venture would inevitably involve Singapore state investment company Temasek, which owns 69% of NOL.

Sources in the maritime industry declined comment on the possibility, but reports suggest that potential scenarios include a share swap or a merger between NOL and Hapag-Lloyd directly, with neither Temasek or TUI directly involved in the deal. Analysts pin NOL’s price tag at about $4 billion, a 20% premium to the company’s current market capitalization. They also note that NOL’s trade at a multiple about 20% lower than TUI’s.

Written by: carisk | Categories: Freshly Minted, The Week in Review | February 14th, 2008 | Add a Comment

Temasek Accumulating Stock in Royal P&O Nedlloyd

Fresh on the heels of last week’s announcement that AP Moller would tender to acquire Royal P&O Nedlloyd, there were this week reports in the Daily Telegraph this week that the Singapore government investment vehicle, Temasek, which owns a 70% stake in rival Neptune Orient Lines, is speculated to be building a stake in P&O (which owns 25% of Royal P&O Nedlloyd). Although such reports have not been confirmed, analysts at Citigroup think it might make sense from a timing and strategic point of view, but not because Temasek is interested in outbidding the mighty Moller. Here’s their reasoning:

* Temasek owns the second largest port company in the world, Ports of Singapore

* Citi believes P&O Ports would be an attractive addition to the PSA, as it would further dilute the dominance of the transhipment port in Singapore, which currently accounts for over 60% of volumes

* It would also make PSA a more attractive company if Temasek looked to IPO it in the future

* NOL has long been mooted in the press as an attractive merger partner for P&O Nedlloyd (PONL) due to complementary route networks

* The recent announcement by AP Moller that it intends to make a cash offer at EUR 57 for PONL may have forced Temasek’s hand

* Given the strong financial backing of AP Moller, entering into a bidding war for PONL would not appear to be an attractive option; however, acquiring P&O would give Temasek a 25% stake in PONL, which could be enough to defend or discourage a bid from AP Moller

* This would give Temasek the option in the future to initiate a merger between PONL and NOL

* Recent bid premiums have been in the range of 20-40%, which would imply an offer of 340-390p would be needed to secure P&O

* There is no tangible evidence at the present time, but Citi believe this is a plausible scenario

* Citi maintains their Buy/ Medium risk (1M) recommendation for P&O and 315p share price target, rates P&O Nedlloyd Hold/ High Risk, price target EUR 57, and rates AP Moller Sell/ High Risk, target price Dkr40,000

Written by: carisk | Categories: Freshly Minted, Market Commentary | May 19th, 2005 | Add a Comment