Moeller Maersk dec. 11th,2018

Moeller Maersk is the world biggest shipping company with revenues of about 40bn $/yr, EBITDA 3.8bn$, capex 3bn$(guidance 2018)Maersk, which moves about 18% of all containers world-wide and is considered a barometer of global tradeMoeller Maersk is actually due to low shipping rates and high bunker fuel prices in its key business not profitable. It was a conglomerate with an oil&gas business. This business was sold recently. The remaining oil&gas drilling activities are planned to go public. 

Potential motivation to buy Moeller Maersk shares is a bet on a turnaound of the container shipping market with higher freight rates hope sooner or more realistic later.  

Chances & Risks

MM plans to pay out from the selling of the oil and gas unit about 5 bn$ and perhaps as well from the IPO of the drilling activities about 3.5bn$. Media speaks about a payout of up to 8bn$ (6) or 400$/share. The pay out seems to depend on the credit rating and at the end on the cash flow achieved by its shipping business.   

The main chance is that the container shipping demand increases and the shipping capacity decreases thus freight rates increase and Moeller Maersk will increase profitability significantly. Moeller Maersk has 350 own ships plus 400 chartered ships in service but only 9 ships are on order. Container ships have a lifetime of 20 - 25 years. That means it would require about 15 new ships/yr. to keep the actual capacity. 

The main risk is that countries like China support their shipbuilding and shipping business without considering profitability. 

Moeller Maersk aims to become a player in the logisitic market. There are already plenty of independent players in the market. I do not think this move will become the most successful one. It would be more promising if MM would focus on an optimization of the shipping core business.   

A challenge for sea shipping are new emission control regulations as of 2020. These regulation are a cost burden for all players in the market. Maersk's key focus will be to use low sulfur fuels including blended ones that are compliant in all geographies," This does not imply that Maersk will not use scrubbers at all -- it plans to invest an overall $80 million in its scrubbers related initiative, Pedersen said (7).

Another risk is that Moeller Maersk as successes in the core business are rare put the focus on green religious nonsense. Actually most articles about Moeller Maersk in Europa are about such nonsense (2). The last communicated initiative is to make MM CO2 neutral by 2050. This is not an issue as it is easy to make promises for 2050. But Mearsk stated to have spent already 1 bn$ in the last 4 years on energy efficiency (8). It is to hope that it created savings > 1 bn$. I would rather appreciate if Moeller Maersk would focus on such opportunities as establishing LNG as bunker fuel. It would help to reduce costs and fullfill environmental requirements (sulphur emissions). Due to its size and the the operatorship of terminals and harbour equipment it is in the ideal position. 

Data & Information

Shares: 

Vote  Menge Float Konzerneigene Aktien Total Float
Aktie A 1 10 060 484 6 436 987 64.0% 60 839 0.6% 46.2%
Aktie B 2 10 756 378 3 190 341 29.7% 0 0.0%
 

Shareholders

Major Shareholders
Name Aktien %
Mckinney Moller Family 3 559 561 35,4%
Invesco Asset Management Ltd. 228 500 2,27%
Fidelity Management & Research Co. 175 768 1,75%
The Vanguard Group, Inc. 164 672 1,64%
Danske Bank A/S (Investment Management) 90 764 0,90%
BlackRock Fund Advisors 73 059 0,73%

Source Marketscreener (5)

 

The Container Shipping Market 

A report by BIMCO estimates that 2018  250.000 TEU will leave the market while the new built is forecasted to 1.05 mio. TEU. That means a capacity increase of 3.9%. The demand is estimated to grow 4 - 4.5% (1). It does not look like a tighter market with higher rates in the near future.  

 

Maersk Block Chain Technology

Some reasons that Maersks logistic platform might not perform successful.."There are fantastic benefits to be had from a blockchain-enabled shipping platform: cost savings, reduced error, increased profit, etc. However, these benefits can’t outweigh the undeniable reality facing Maersk’s competitors: to join the TradeLens network is to make Maersk more profitable....Another obvious issue is that Maersk owns the intellectual property that the TradeLens platform is built on. Even assuming safeguards are put in place (to ensure that unfair advantage is not taken by Maersk or its agents), the optics are terrible." (3)

This is not a recommendation or proposal to do anything. It is my private personal opinion. I`m not independing as I own a position of Moeller Maersk shares. 

 

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A few references

8. 2018/12/11 https://www.electrive.net/2018/12/09/maersk-will-seine-schiffflotte-bis-2050-co2-neutral-machen/

7. 2018/11/19 https://www.spglobal.com/platts/en/market-insights/latest-news/shipping/111918-interview-maersk-group-favors-low-sulfur-fuels-working-on-new-bunker-adjustment-factor-exec

6. 2018/11/15 https://www.bloombergquint.com/business/an-8-billion-payout-from-maersk-raises-questions-for-creditors#gs.HaJSnZs

5. https://de.marketscreener.com/AP-MOLLER-MAERSK-1412885/unternehmen/

4.https://seekingalpha.com/article/4222042-p-moeller-maersk-sa-2018-q3-results-earnings-call-slides

3. 2018/11 https://www.hellenicshippingnews.com/how-maersks-bad-business-model-is-breaking-its-blockchain/

1. https://www.seanews.co.uk/container-shipping-market-an-outlook-for-2018/

2. https://seekingalpha.com/news/3387060-maersk-tests-wind-power-cut-shipping-fuel-costs?ifp=0&v=1535715900

http://www.themaritimepost.com/top-10-biggest-shipping-companies-world/

https://steelguru.com/logistic/ap-moller-maersk-takes-next-steps-in-integration-to-improve-customer-experience/521652