Investors piled into Neptune Orient Lines (NOL) yesterday on news that the company is in separate talks with two shipping giants about a possible buyout.
The stock opened more than 7 per cent up at $1.125 - its highest intra- day price since May 13 - before tapering off to end at $1.055, one cent or 0.96 per cent up on last Friday's close, with around 45 million shares changing hands. This is more than four times its daily average trading volume for the past month.
The counter is up about 20 per cent this year, driven in part by constant market talk of a buyout.
NOL, the largest container shipping company in South-east Asia, confirmed in a Singapore Exchange filing last Saturday night that it is in preliminary discussions with both France's CMA CGM and Denmark's AP Moeller-Maersk regarding a potential sale.
"NOL has a duty to assess all options to maximise shareholder value and improve its competitiveness," the firm said. "From time to time, NOL enters into discussions on possible combinations involving NOL, while remaining focused on returning its core liner business to sustainable growth and profitability."
It added: "There is no assurance that any such discussions will result in any definitive agreement or transaction, or that any offer for NOL will be made, or as to the terms on which any such offer might be made."
The company said yesterday that it had no further comment on the announcement.
The firm, which has a market capitalisation of about $2.81 billion, was founded in 1968 as Singapore's national shipping line. It has been mired in debt and unable to return to profit in recent years amid the downturn in global shipping.
Last month, the firm reported a wider net loss of US$96.1 million (S$137 million) for the third quarter - worse than the loss of US$52.3 million in the same period last year - as muted demand and lower freight rates continued to depress earnings.
A Bloomberg report citing people familiar with the matter said CMA CGM has made a preliminary offer for the firm, while the ongoing talks with AP Moeller-Maersk are in less advanced stages.
CMA CGM is the third-biggest container shipping firm globally, with a fleet of 467 vessels transporting 12.1 million 20-foot equivalent units of cargo annually, while Maersk Line, AP Moeller-Maersk's container shipping unit, holds the top position.
A CMA CGM spokesman confirmed that talks for the potential acquisition of NOL are under way, but added that "given the early stage of those discussions, there is no certainty that a transaction will actually occur".
Analysts remain sceptical that a deal could be closed soon as the slump in the shipping sector dampens appetite for aggressive bidding.
OCBC Bank investment analyst Eugene Chua said in a note that Singapore investment firm Temasek Holdings, which owns 67 per cent of NOL, may be "unwilling to sell its stake given the current low valuations in the industry".
He noted that NOL's price-to- book ratio stands at 0.76, well below its 13-year average of 1.05, which means that the stock is significantly undervalued.
CIMB analyst Raymond Yap said in a note that he maintains a "hold" call on NOL shares, with a target price of 95 cents, although "risks are skewed to the upside".
Maersk Line and Temasek Holdings declined further comment.
