Cargo Business Newswire

Thursday, May 19, 2016

Top Story

Maersk investor shares up on consolidation, low oil

Since a February low, investors who held their A.P. Moeller-Maersk shares despite declining oil and freight rates are now about 24 percent richer, measured on total returns. As of Tuesday, only four of the 29 analysts covering Maersk recommended selling the stock. Seventeen are advising clients to buy while eight are telling investors to hold on to existing shares.

Brent crude’s 75 percent jump from a Jan. 20 low is supporting Maersk’s oil business. And though the container market is struggling, consolidation is set to bolster freight rates and support the industry, according to Frans Hoyer, an analyst at Jyske Bank.

"I believe container lines will start acting more responsibly and not compete so fiercely on rates after adapting to the new situation of low growth," Hoyer said by phone. "Looking at the rest of the year, I believe we’re facing a gradual recovery in container line profitability, which could support the Maersk share. That’s also one of the reasons we’re positive on the stock." Jyske is among banks advising clients to buy.

Hoyer says industry consolidation is key. Global container lines are increasingly forming alliances

to help cut costs and underpin freight rates. Last month, CMA CGM SA and three other major lines signed a preliminary agreement to form a new group called Ocean Alliance, which could become the second biggest after Maersk Line’s partnership with Mediterranean Shipping Co.

The development "could also help the market and the likes of Maersk Line in particular," Hoyer said.

Hoyer also said Maersk has also surprised the market with the extent of the cost reductions in its oil division.

For more of the Bloomberg story: www.bloomberg.com