Analysts: Modern Fleet Makes Singapore's NOL a Bargain at $2 Billion

Analysts say that should a sale of NOL come to fruition, the transaction would offer the buyer “a modern fleet at a comparative bargain price".

Banking and industry analysts say that should a sale of Singapore-based Neptune Orient Lines (NOL) Group by Temasek Holdings Pte. Ltd. (Temasek) come to fruition, a price of about $2 billion would offer the buyer “a modern fleet at a comparative bargain price," Reuters reports.

However the analysts note that NOL has lost more than $1 billion in value over the last four years and the potential sales comes at a time that the global container shipping industry is in a prolonged downturn, and the sector's global debt now almost doubled to $86 billion over the past ten years.

Andy Lane, a partner at Singapore's CTI Consultancy, said that in this context, NOL's appeal is boosted by the company’s young fleet.

“My favourite motivation for the buy remains fleet renewal. There is global overcapacity, but shippers also need to keep their fleets right-sized, flexible and young,” said Lane.

Some industry analysts also assert that in addition to NOL's newer ships, its 2.8 percent global container shipping market share will be a selling point for those wishing to gain an edge over rivals.

Temasek is reported to have recently hired Citigroup Inc (C.N) to seek buyers for its 65 percent majority stake in NOL, which under Singapore rules would trigger a sale of the whole company.

NOL has so far declined to comment directly on speculation of a sale, or analysts’ assertions that buyers would need to offer a minimum 30 percent more than NOL's current market value of about $1.8 billion.

However the door appears to have been left open for any potential buyer, with NOL last month saying that it "has a duty to consider its options to maximize shareholder value as part of its conduct of normal business."

CEO Ng Yat Chung has now suggested that NOL is "hypothetically" for sale.

"The company has a duty to consider all options to maximize shareholder value. Hypothetically if I receive a good price for the business, we will always consider selling," he said.

"What I can say now is that the company is totally focused on returning the liner business into profitability.”

Last week, Drewry called NOL's assets unattractive, and that a sale was unlikely due to a lack of suitable buyers, along with there being no apparent urgency to push through a sale.

Last Thursday, NOL announced that it had achieved a net profit of $3 million outside of the $887 million it gained in the $1.24 billion sale of its supply chain management business, APL Logistics Ltd. (APL Logistics).