Saturday, June 22, 2013

Company in focus - Neptune Orient Lines (NOL)

The next company i'll be analysing is NOL. This is a shipping company and since i've been talking about shipping companies turning around if the economy recovers, i'll put it in this blog post.

This shipping company has 2 main brands: 


APL Logistics

If you pass by the singapore  shipping port near tanjong pagar area and harbourfront, you'll see a lot of APL containers. Due to the crisis in Europe and the financial crisis in US, import and exports around the world were affected badly. NOL has been in a net loss for the past 2 years from 2011 to 2012.

Temesak holdings, a government linked corporation is still one of the largest shareholder in NOL. 

The top few largest shareholders in NOL according to its 2012 full year financial report is as follow:

1) Lentor Investments Pte Ltd (39.58%)
2) Temasek Holdings Pte Ltd (25.94%)
3) Citibank Nominees Singapore Pte Ltd (2.74%)
4) DBS Nominees Pte Ltd (1.97%)
5) Raffles Nominees Pte Ltd (1.77%)

As i said earlier, NOL is in a net loss at the moment. In 2011, net loss was 478 Million and in 2012, net loss was 413 Million. You may be scared by the losses this company is incurring but in actual fact, shipping companies go through cycles and during low growth or recession periods, most of them are in losses. Only those big companies can survive through the storms and emerge out again. 

In 2009, NOL was also in a net loss of 739 Million, much higher than the loss currently. However, in 2010 when the economy started to recover, it swung into profit of 464 Million. 

Let's fast forward to Q1 of 2013 where NOL reported its financials for the period ending 5th April. It has turned into profits with a net profit of 76.5 Million for Q1 of 2013. If the next quarter it reports profit again, i would think that the shipping industry is on its way to recovery. NOL shares are trading at $1.09 now. It was trading at more than $2 before it collapse to the level it is now. A strong support is seen at $0.90 to $1 as the stock has bounced from this level a few times.

This is quite a risky investment as the various valuations methods do not work anymore. There is no p/e ratio, no intrinsic value to calculate and negative roe. 

The growth of this company will depend a lot on the economic conditions especially in the US and Europe. I am watching this closely and getting ready to ride on the recovery. Investing at this junction requires risk management and a lot of guts too. It is really a bet into the future. We will see how the economy develops and whether this bet on the shipping recovery will be correct. I think it may take at least 1 more year for it to fully recover. Investors will buy in early anticipating the recovery. Remember, the stock market is always ahead of the economy by 6-9 months. 


  1. Hi SGYoungInvestment,

    NOL is back in the black primarily due to its sale of its HQ along Alexandra Rd...

    I don't know if you read the financial statement, but its profit on the sale of PPE was 196mil. Now NOL is paying rent to use its HQ...

    If we were to exclude the one-time gains, NOL is still in the red.

  2. Hi Matthew,

    Thanks for pointing that out. Looking at its revenue, its not increasing at all. In fact, cogs is increasing which is not good. If its paying rent now to use its HQ, then their expenses will go up higher even more. Seems like the shipper is still struggling to survive.