Not easy to find a buyer for Singapore's NOL, says Alphaliner
THE proposed sale of Singaporean shipping company Neptune Orient Lines will be no easy task, according to Alphaliner.
Alphaliner said significant obstacles stood in the way of any eventual sale, mainly related to the difficulty of reaching an agreement on NOL's valuation. The Singapore-listed group continues to trade at a 24 per cent discount to its book value, reflecting the market's skepticism that a sale can be successfully finalised.

NOL has confirmed that it was in preliminary discussions on a potential acquisition with Maersk Line and CMA CGM. In the past year rumours circulated that Hapag-Lloyd, PIL, OOCL and UASC have emerged as potential suitors, reported IHS Media.

The analyst said NOL's container shipping arm, APL, has been "chronically unprofitable" since 2009, which prompted NOL to sell a number of assets to boost liquidity, including its corporate head office building in Singapore for US$310 million in 2012 and its logistics arm, APL Logistics, for $1.2 billion to Kintetsu World Express earlier this year.

Even aggressive cost savings measures by APL have failed to lift NOL out of the red, with its third-quarter results showing a net loss of $96 million.

In market share terms, Alphaliner estimates that APL's global capacity share declined to 2.8 per cent currently, down from to 4.2 per cent in 2010.

From being one of the top three carriers engaged in the trans-Pacific trade in 2000, APL is now ranked in eighth place and its trans-Pacific volumes now trail Evergreen, Maersk, Hanjin Shipping, MSC, CMA CGM, Cosco and "K" Line, further reducing APL's attractiveness as a takeover target.

APL also lacks assets that would attract a premium, Alphaliner said. Its fleet of 57 owned ships with a total capacity of 472,000 TEU, is valued at between $3 to 3.5 billion based on the analyst's estimates, compared to a book value of $4.7 billion at the end of last year.

APL's other assets are its investments in nine container terminals, with an estimated throughput of 4.47 million TEU in 2014.

According to SeaIntel CEO Lars Jensen, acquiring NOL would enable either Maersk Line or CMA CGM to strengthen its trans-Pacific business and mitigate each's weakness in the Asia-Europe trade lane.

He said APL offers a strong fleet of vessels in the 8,000-10,000 TEU size range that would enable a potential buyer to renew its fleet with vessels that are better suited to the trans-Pacific route.

"APL doesn't have an orderbook, but over the last two to four years they have had quite a lot of vessels in the 8,000-10,000-TEU range delivered," said Mr Jensen.