Thursday, March 06, 2008
Results Brief: OOIL (316)
The results surprised me in two ways.
1st, it was quite remarkable that the rising oil price did not seem to bother the operation too much. OOIL still managed to grow its profit by 29% (recurring and excluding property revaluation) last year. Gross profit was down a bit but operating margin stayed at around 9%, indicating high efficiency.
In fact, last year's profit of $4.3b was not far off from the all-time-high of $4.9b (excluding port operation) achieved in 2004. To say OOIL is well managed is an understatement.
But the negative surprise was the lack of a special dividend, which surely has upset the market including myself. So far only about half of the $17.3b proceed from selling the North America ports has been paid out, and management continues to be mute about the use of fund. I recall UBS was once hired to advise on this matter but if there was any result, it wasn't made known to the shareholders. The cashflow breakdown also confirmed my earlier belief that the shipping business can be self-financed, i.e. cashflow coming in was sufficient for capital expansion. So there's really no need to keep a large pile of cash at the head office.
Another omission was the lack of the outlook section in the results announcement. Maybe the outlook is really cloudy that the management don't want to commit to any view, or they want us to know as little as possible.
China property business had some progress but contribution won't come until 2010. NAV was $5b. Applying a 2x p/b to it and adding the valuation of Wall Street Plaza, the property business should be worth $11.5b. However, the market doesn't seem to attribute much value to OOIL's property business.
Idle cash is at least $8.5b, from disposal proceed alone, and could be as much as double.
For the fleet, I'd stick to my estimate of $24b, i.e. $3b x 8 times p/e.
The combined valuation would suggest an upside of at least 50% from today's price.
DISCLOSURE: I hold 316 at time of writing.
1st, it was quite remarkable that the rising oil price did not seem to bother the operation too much. OOIL still managed to grow its profit by 29% (recurring and excluding property revaluation) last year. Gross profit was down a bit but operating margin stayed at around 9%, indicating high efficiency.
In fact, last year's profit of $4.3b was not far off from the all-time-high of $4.9b (excluding port operation) achieved in 2004. To say OOIL is well managed is an understatement.
But the negative surprise was the lack of a special dividend, which surely has upset the market including myself. So far only about half of the $17.3b proceed from selling the North America ports has been paid out, and management continues to be mute about the use of fund. I recall UBS was once hired to advise on this matter but if there was any result, it wasn't made known to the shareholders. The cashflow breakdown also confirmed my earlier belief that the shipping business can be self-financed, i.e. cashflow coming in was sufficient for capital expansion. So there's really no need to keep a large pile of cash at the head office.
Another omission was the lack of the outlook section in the results announcement. Maybe the outlook is really cloudy that the management don't want to commit to any view, or they want us to know as little as possible.
China property business had some progress but contribution won't come until 2010. NAV was $5b. Applying a 2x p/b to it and adding the valuation of Wall Street Plaza, the property business should be worth $11.5b. However, the market doesn't seem to attribute much value to OOIL's property business.
Idle cash is at least $8.5b, from disposal proceed alone, and could be as much as double.
For the fleet, I'd stick to my estimate of $24b, i.e. $3b x 8 times p/e.
The combined valuation would suggest an upside of at least 50% from today's price.
DISCLOSURE: I hold 316 at time of writing.
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Thanks! I really enjoy reading your articles. Tips & Articles on Real Estate
# posted by 
: 1:29 PM, March 07, 2008
: 1:29 PM, March 07, 2008
this is cold season of container shipping this year.. ..to Europe base port, it drop fm 1200 + obcd + pss to 850 + obcd now ..drop 36% O/F... and the loading is around 50% only recent few weeks in SPRC.. ..
# posted by : 5:49 PM, March 07, 2008
: 5:49 PM, March 07, 2008
In the latest issue of the Economist, there is an article entitled "Heavy Weather " on the Shipping Industry with the conclusion that the profit outlook for the industry is not optimistic in the face of US recession and oversupply. I believe OOIL 's share price will not rise above its NAV of about $50 in the near term until the outlook for the industry has improved or until there is further realisation of profit from its assets.
# posted by : 12:22 PM, March 08, 2008
: 12:22 PM, March 08, 2008
thank you for your comments. i just read that article too. but there wasn't a lot of new materials there and it appeared most were coming from an investment analyst. i recall most analysts have not been correct in predicting the fortune of the ship-liners over the past few years, if they can predict anything (neither can i of course).
i'm sure the outlook this year won't be as bright and there'll be a decline in profit, so in my valuation i've already used a lower averaged-out earning as a base. given OOIL's past record in weathering bad times and its cash reserve, i figure i probably won't lose my shirt even if i'm proven very wrong down the road. so it's a bet worth taking.
i'm sure the outlook this year won't be as bright and there'll be a decline in profit, so in my valuation i've already used a lower averaged-out earning as a base. given OOIL's past record in weathering bad times and its cash reserve, i figure i probably won't lose my shirt even if i'm proven very wrong down the road. so it's a bet worth taking.
Yap! The ship(316) is old but it's been through lots of hard times.
Right now we are in the strongest storm (global recession) and I'm quite confident Mr. Tung can carry us
through the low tie. He's trying to land in Bejing and Shanghai,just like
What Swire Pacific(Taikoo) did some 20 years ago. Go Mr. Tung!
Right now we are in the strongest storm (global recession) and I'm quite confident Mr. Tung can carry us
through the low tie. He's trying to land in Bejing and Shanghai,just like
What Swire Pacific(Taikoo) did some 20 years ago. Go Mr. Tung!
# posted by : 2:51 PM, April 23, 2008
: 2:51 PM, April 23, 2008
I bought into OOIL (316)today. I looked at the result and I looked at the P/E (1.36). Now, I compare that P/E with that of COSCO (1199) and CSCL (2866) which was 9.95 and 9.42 respectively(at the time of writing). So, in my opinion, OOIL is undervalued to other companies in the same industry and to the Hang Seng Index itself.
thks for comments.
soros hing, i think you referred to ex-chief executive mr. tung but he's not the one running OOIL, becoz if he was then i would've given 2nd or 3rd thought before buying it.
stephen hing, the p/e of 1.x has included an exceptional gain from the disposal of ports last year. but still OOIL valuation is cheap as you said.
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soros hing, i think you referred to ex-chief executive mr. tung but he's not the one running OOIL, becoz if he was then i would've given 2nd or 3rd thought before buying it.
stephen hing, the p/e of 1.x has included an exceptional gain from the disposal of ports last year. but still OOIL valuation is cheap as you said.
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