Thursday, 13 August 2015

Maersk - good progress despite difficult markets

I talked a year ago about why I thought the world's leading container shipping company AP Moeller-Maersk was really interesting below a DKK13,000 share price (link here).

Fast forward a year and the shares have been up and down but ultimately are still below that aforementioned DKK13,000 level.

Of course container shipping and oil have hardly been in the vanguard of performing sectors of the stock market over the last year and this was shown in the results today (even if the free cash flow was assisted by the material Danske Bank simplification disposal - hugely helpful in my view).  

But out of at face value unpromising results some real signs of relative progress / outperformance.  The fifth quarter of 10%+ container shipping ROIC for example...

...which when combined with lower costs led to the results noted above.  Far, far in advance of global peers.  

There are some benefits too with such cost control with the guidance, assisted by a capex cut (unsurprising: every shipping, oil company is doing this) being unchanged at both an 'underlying' basis and from a cash flow from operating activities basis too.  That's impressive - particularly as the Oil and Terminals business both had clear negative revision and global demand for container transportation was also revised down:

What is also supportive is the balance sheet where relative prudence in terms of the balance between capex and cash flow has been adhered to for years.  What has changed more recently however is the simplification in the portfolio (re the Danske Bank sale mentioned above) plus the hikes in the dividend payment (3%+ now) and today's comment about the initiation of a US$1bn buyback.  

In short - and despite it not being an easy backdrop - Maersk are making all the right moves.  Below a DKK13,000 share price to acquire more shares still makes sense to me.  A quality operator and geared towards more rationality in their markets too (e.g. news earlier this week of potential Chinese container shipping mergers).

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