EUR 850.00 For Business Accounts Only

Morningstar | Maersk Ships a Decent Performance in 3Q, Shares Remain Undervalued

Shipping giant Maersk delivered a solid third-quarter update, with like-for-like revenue up 12% year over year and EBITDA up 16%, as a combination of a more supportive macroeconomic environment, weak comparatives, and an element of self-help drove performance. These results were broadly in line with our full-year expectations and as such we do not expect to make any material changes to our forecasts. We reiterate our no-moat rating and DKK 12,000 fair value estimate. We see an attractive upside opportunity from the current share price.

Ocean, Maersk’s primary business, which generates over 70% of group revenue, saw volume growth of 5% over the period, almost twice the market level. EBITDA margins of 12.6% were a solid achievement given the huge ramp-up in bunker fuel costs in 2018. Maersk’s swift action on this--introducing a fuel surcharge from the end of the second quarter--helped to recover some of this increased cost. However, the situation remains tenuous with fuel costs still rising. We believe the supply/demand picture for ocean freight for the next few years to be supportive of the business, with Maersk reporting no new vessel orders placed in the quarter and no deliveries expected before 2020. The other material businesses in the group, logistics and services, and terminals and towage, registered much-improved results year over year, with margins in the latter improving further to 20.5% as the added bulk of Hamburg Sud to the ocean freight business has led to greater throughput in the terminals business.

Longer term, we believe the Maersk story to be an attractive one. The company has in the past two years become a focused transport business, has shored up its balance sheet significantly, and should be in a good position to return significant amounts of cash to shareholders over the next few years.