NOL shares surge on talk of potential sale
Singapore
SHARES of Neptune Orient Lines (NOL) surged on Monday to their highest level in almost seven weeks on talk last week of a potential sale of the loss-making shipping liner.
NOL shares jumped as much as nine cents or 10.3 per cent to 96.5 Singapore cents before settling at 94 cents, up 6.5 cents or 7.43 per cent from S$0.875 last Thursday. Friday was a public holiday. The stock made it to the top 20 most actively traded after 30.1 million shares changed hands. NOL shares sank below the S$1 mark in early June.
Responding to media reports on the potential sale, NOL announced on Sunday that "the company has not made any decision with respect to, and has not entered into any agreement for, a potential sale of the company". There was no assurance that any agreement for the sale of the company would be be entered into.
But it added: "The company has a duty to consider its options to maximise shareholder value as part of its conduct of normal business." NOL was founded in 1968 as the Singapore's national shipping line.
Analysts on Monday were warm to talk of a potential divestment, saying that the struggling liner had lost its status as a crucial strategic investment and it might be a good idea for parent company Temasek Holdings to make an exit. NOL has also become a more attractive takeover target especially after it completed the sale of its profitable logistics arm in late May this year for US$1.2 billion in cash, they added.
"NOL has become a pure-play container shipping company and we think that it is indeed now more attractive to prospective buyers," said OCBC Investment Research in a note on Monday. It kept its 'hold' rating on NOL with a fair value estimate of S$1.15.
Temasek had paid S$2.80 per share in 2004 to boost its stake in NOL from 30 per cent to around 69 per cent. It now owns about 67 per cent of the company, going by Bloomberg data.
UOB Kay Hian also said in a Monday report that the possibility of Temasek selling off its NOL stake was "highly probable". Though it estimated the group's equity value to be S$0.89 per share or about US$1.8 billion, it said that Temasek would likely push for higher valuations. The brokerage maintained its "buy" rating, raising its target price from S$1.01 to S$1.08.
"NOL has been shopped to prospective buyers in recent months," according to a Wall Street Journal report last Thursday which cited unnamed sources. "It has been in talks with one, but the two sides couldn't agree on a price," said the report. "The discussions could include other potential buyers."
The Singapore investment company declined to comment on Thursday.
In February this year, NOL gave notice that it "has recorded pre-tax losses for the three most recently completed consecutive financial years...excluding exceptional or non-recurrent income and extraordinary items".
For the ended Dec 26, 2014 (FY14), its net loss more than trebled to US$260 million from US$76 million as FY13 results included US$200 million one-time gain from sale of NOL's headquarter building.
