Wednesday, 25 February 2015

AP Moeller Maersk - shipping sector excitements

One of my better investment moves over the last few months was buying a position in the Danish shipping, oil and related conglomerate AP Moeller Maersk.  My original justification was in hindsight beautifully short - as reproduced in full below:

AP Moeller Maersk - bought a starter position in the Danish listed global leader in container shipping inspired by previous analysis/levels (link here) and this chart:


Today's quarterly update was well-received by the market with the shares pushing up close to a one year - which is itself pretty close to the all-time high set in late 2007 before the global financial crisis.  


So what was so exciting in what they said?  Well all the key metrics looked good and divisionally the container shipping business made strong progress...whilst the oil/related businesses were not too weak: 


This was not the main reason for the share price strength today.  This came from the news that the company was looking to further simplify its business via the divestiture and distribution of the company's stake in Danske Bank equivalent to effectively a 10% special dividend.  


This is important as historically the company has been valued more on the basis of its (volatile but worthy) other businesses.  That the share has rallied by a proportional amount not dis-similar to the effective special dividend is not lost on me.  

Elsewhere progress was good with the container shipping and related business showing a fourth successive year of return on invested capital improvement...


...as well as a pleasant combination of volume increases plus cost reductions.  Additionally the comment on the conference call on the division that 'the market is not so oversupplied at the moment...there are not many idle ships' made pleasant listening. 


Combine this with some retained confidence in a couple of their oil division investments, a strong returning Terminals business and a prudent battening-down-the-hatches approach to oil services and an anticipated 5%+ rise in year-on-year ebitda for FY15e, a just over x10 EV/ebit ratio and a 3%+ yield even without the aforementioned de facto special and you can understand the move today. 

Given the move year-to-date the share is clearly not as cheap as it was but I am in no hurry to sell rather awaiting opportunities to augment my position on pullbacks - which given the general nature of markets (and especially to the shipping/oil/related industries) will occur.  I have penciled in below DKK15k as a particular area of interest.  

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