No Sale for Singapore's NOL, Says Drewry

A lack of suitable buyers, unattractive assets, and no real urgency for a cut price deal mean a sale is unlikely.

A lack of suitable buyers, unattractive assets, and no apparent urgency to push through a cut price deal means Singapore-based Neptune Orient Lines (NOL) is unlikely to be sold, Drewry concluded Monday in its latest Container Insight Weekly.

"There are several obstacles to a full sale of NOL: its parent company is not under pressure to sell and is unlikely to accept a low price, there are few willing buyers, and its fleet is not an attraction," says Drewry.

"More likely, Temasek will remain as a substantial shareholder after either a direct stake sale or indirect stake sale through Lentor."

Ship & Bunker reported last week that Government run Temasek Holdings Pte. Ltd. (Temasek), who owns 65 percent of NOL, was looking to sell off the box business for for $1.7 billion.

While NOL downplayed the rumours, it left the door open to a potential sale by noting it "has a duty to consider its options to maximize shareholder value as part of its conduct of normal business."

Reports have indicated negotiations with one potential buyer had been unsuccessful as a sale price could not be agreed, suggesting that Temasek is unlikely to agree to a cut price deal.

That position is supported by the fact that NOL has, at current stock price levels, a market valuation of about $1.83 billion meaning it is a small part of Temasek's entire net portfolio which is valued at S$266 billion ($194bn).

Tough Sell

But even if there was reason for a fire sale, Drewry says the "habitual loss-maker" would be a tough sell, and data from Alphaliner indicates NOL has a cumulative net loss of $1.5 billion since 2009 total, while its global capacity share that has fallen from 4.2 percent to 2.9 percent since 2010.

NOL's box brand, APL, currently stands as the world's twelfth largest with 561,784 TEU of capacity, according to Alphaliner.

But having failed to join the race for 18,000+ TEU capacity Ultra Large Container Vessels (ULCVs), its largest vessels being its 10, 14,000 TEU boxships within its total 92 vessel fleet, the bare orderbook means it looks set to be passed in the near future by the likes of UASC, NYK Line, and Yang Ming Marine Transport Corp. in terms of raw capacity.

Andy Lane, partner at CTI Consultancy has previously said there was no real need for Singapore to have a national shipping line, and Drewry agrees the national interest argument for keeping NOL holds little weight.

"Singapore is one the best served countries in the world, regularly featuring near the top of logistics and liner connectivity," it said.

"NOL helped to make Singapore the shipping hub it is now but losing the company wouldn't jeopardise that status."

However Drewry said there was one good reason for Temasek to keep NOL.

"As full owner of container terminal operator PSA International it could use NOL, and its G6 Alliance partners, to utilise Singapore's new 65-million TEU pa capacity mega-port at Tuas, first-phase (25m teu pa capacity) scheduled to be ready in six years."

Earlier this year NOL said low bunker prices helped cushion a net loss of $11 million for the first quarter of 2015, an improvement on the $98 million net loss for the same period last year.