Abstract
Singapore-based Neptune Orient Lines (NOL) in late May announced a rights
issue worth SGD1.44bn
(US$1bn). BMI analyses the reasons behind the move,
which follows news of a US$245mn net loss for
the group in Q109. A total
of 1,105,081,798 shares will be offered to existing shareholders at the
discounted price of SGD$1.30, while a statement released by the group
underlined the motives behind the
shares issue. Half of the proceeds from
the issue are expected to go towards current debt repayments,
while the
rest is aimed at increasing working capital and covering future debt payments.
The group also
hinted at the potential for using some of the capital
raised for investment opportunities. NOL CEO Ron
Widdows said:
‘Asset prices are depressed and will probably remain so for some time.
It' s certainly an
area that we would look at as opportunities
develop.’ BMI notes that NOL reported a net loss of
US$245mn for the
first quarter of 2009, following decreased revenue from its core container
shipping and
terminal operating businesses. Falling income has resulted in
rising debt levels with the company
reporting net debt of US$1.044bn as of
April 3 2009 – an increase of US$228mn from the previous
quarter.
The rights issue is expected to bring the group’s net debt ‘close
to zero’. While NOL’s financial
situation remains finely
balanced with the company expecting to report a full-year loss in 2009,
BMI
believes the timing of the rights issue is based on renewed investment
appetite for shipping stocks, with
NOL’s share price having risen by
54% in 2009 after falling in value by approximately 75% in H208.
BMI’s newly released Singapore Freight Transport Report concludes that
because of global economic
cooling, the country’s maritime freight
volume will rise by an annual average of only 0.5% throughout
the
2009-2013 forecast period. Our shipping forecast is based on a number of
factors. Our forecast for
Singapore’s average GDP growth over
2009-2013 now stands at 1.3%, largely because of the sharp
contraction
this year. NOL and other Singapore-based companies have established themselves
as worldclass
players. We expect them to be significantly affected, but
manage the global downturn reasonably
well and position themselves for
eventual recovery, despite the growing competitive challenge from
Chinese
ports. Other transport modes will all be affected by the recession. We are
forecasting 1.9%
annual growth in air freight over the next five years.
Overall, we now expect average annual growth in
freight tonnage across all
modes to total 0.7% in the 2009-2013 period. With an aggregate score of
60.2
out of a theoretical maximum of 100, Singapore scores well in
BMI’s freight ratings for the Asia Pacific
region, coming out
comfortably above the regional average. Its strong rating stems from low
long-term
political and economic risk and a strong regulatory environment,
as well as a moderate, but healthy rate of
infrastructure growth.
For
the 2009-2013 period, we expect the transport and communications sector to be
on a par with the
economy as a whole in value terms, with both forecast to
achieve average annual growth of 1.3%. The
total value of transport and
communications GDP will rise to US$22.8bn in nominal terms by 2013,
representing 12.1% of Singapore’s GDP.
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