EUR 850.00 For Business Accounts Only

Morningstar | Maersk Falls Over the Line in 2018

No-moat Maersk’s full-year results were a real dog’s dinner, with the sale of Maersk Oil and Maersk Tankers, the addition of Hamburg Sud, and the announced spin-off of Maersk Drilling all clouding what was an expectedly mediocre set of numbers. However, warnings around trade wars and a slowing European economy culminated in EBITDA guidance of around $5 billion for 2019. While we might adjust some our near-term forecasts, we do not expect to make material changes to our longer-term expectations. We reiterate our DKK 12,000 fair value estimate for the stock and believe that at a current P/E of less than 8 times, it represents an attractive opportunity for investors willing to look past the current malaise.

Maersk’s ocean business, which generates 70% of group revenue saw a relatively underwhelming performance in 2018. Increasing fuel prices were not fully offset over the period, resulting in an EBITDA margin of 7.8%, down from 11.4% in 2017. There were signs of structural improvement, though, as the former conglomerate becomes a more focused entity. EBITDA margins in terminals and towage, Maersk’s second-largest business, rose more than 2 percentage points to over 20%, as the effects of an increased partnership with the ocean and logistics businesses begin to come through. The company has also made some progress selling down its stake in oil giant Total, generating $3 billion in cash over the period. While we see value in the remaining portfolio, we also believe the realization of value by spinning off the drilling business and selling more of its Total stake will ultimately benefit shareholders.