Morningstar | MAERSK B Updated Forecasts and Estimates from 15 Oct 2018
Having pre-released their second-quarter results just a couple of weeks ago on the back of difficult conditions in the container shipping space, there was little in the way of surprises on the performance front for no-moat Maersk in the firm's Aug. 17 update. Where we did see some developments was around portfolio management. First, the company has decided that the optimal solution for Maersk's drilling business is a split-off in 2019, which should generate around $1.2 billion in cash. The company has secured stand-alone financing of $1.5 billion for the drilling business, which should set it off on a strong footing and further deleverage the parent entity. The second point of interest in the update was regarding the company’s holding of Total shares, of which it has disposed of 19.25 million over the past quarter, generating $1.2 billion in cash. We view this trimming of the position as eminently sensible portfolio management, particularly given that Total shares are currently trading close to decade highs, and Maersk still holds a position valued at a whopping $5 billion. Ultimately, despite the current market conditions in ocean freight, which exemplifies the commoditised nature of the industry, we believe Maersk shares are undervalued and view the ongoing portfolio management actions as a positive development, further improving the risk/reward equation. We reiterate our DKK 12,000 fair value estimate for the stock.A.P. Moeller Maersk is an international shipping company. Co.'s operating segments are: Container shipping and related activities which include global container services, inland transportation, manufacturing and repair of containers and container depots, and logistics and forwarding activities; APM terminals; Tankers, offshore and other shipping activities which include tanker shipping of crude oil, oil products and gas, offshore drilling activities and operation of land rigs, supply vessel activities with anchor handling and platform supply vessels, ferry services and door-to-door transportation in Northern Europe; Oil and gas activities; Retail activity; and Shipyards and other activities.
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