A brewing challenge for the yards

Our 17th Annual Energy & Shipping Conference was well attended by investors and industry executives showcasing the still-growing interest for the sectors. Limited yard capacity is fuelling high newbuilding prices and raising freight rate expectations for the vast fleet renewal necessary in the coming decade. Long lead times underpin a bullish supply story for much of shipping in the coming years, albeit exposed to geopolitical risks affecting trade patterns. Our overall impression was general op...

A. P. Møller Mærsk (Sell, TP: DKK9500.00) - No relief in sight

Maersk’s 2024 outlook solidified our view that headline spot rate movements should be insufficient to save liners from a challenging market that should soon see a race to the bottom once more. In the ensuing dogfight, someone will have to lose out in order to rebalance a vastly oversupplied market. With such an outlook, current cash buffers are of limited value to investors. We reiterate our SELL, and have cut our target price to DKK9,500 (10,400).

A. P. Møller Mærsk (Sell, TP: DKK10400.00) - Expect the unexpected

The 2024 guidance should be the highlight of the Q4 report and clarify the potential implications for Maersk of Red Sea disruptions in an uncertain container market. Assuming normalisation in H2, we reiterate our SELL but have raised our target price to DKK10,400 (9,600).

Decisive hit from weaker macro

Deteriorating macroeconomics and concerns about an impending recession have added to an already-grim outlook. The 2023 demand setback is polarising supply and demand as the towering orderbook pushes 2023–2026e supply growth towards 7% p.a. with demand set to be closer to 2%. Hence, utilisation should fall to record-lows, fuelling a race to the bottom for rates. The ensuing industry-wide cash burn looks set to decimate sector balance sheets. With no bright spots on the horizon, we reiterate our S...

A. P. Møller Mærsk (Sell, TP: DKK11500.00) - Set for another near-term...

Based on recent data points, we have raised our Q3e due to a slower rate decline and more cost-cutting potential. We are now 16% above consensus’ Q3 EBITDA, but remain 30% below for 2024e and 2025e. Thus, we forecast a near-term beat, but expect focus to remain on long-term prospects that should continuously deteriorate. We reiterate our SELL and DKK11,500 target price.

A. P. Møller Mærsk (Sell, TP: DKK11500.00) - No more profits in sight

We find the continued ordering of new vessels at a time of tumbling rates and dwindling profitability concerning for the sector. While Maersk proved it could cut costs efficiently to aid Q2 margins, we expect no net profit in our forecast horizon. We believe the race to the bottom for rates has only just begun as deliveries pick up, and have downgraded the stock to SELL (HOLD) and cut our target price to DKK11,500 (14,200).

Northern Lights

Northern Lights

A. P. Møller Mærsk (Hold, TP: DKK14200.00) - Near-term positives for Q...

Spot rates turned upwards recently, suggesting efficient capacity management by the liners, which are struggling to match higher costs. With fuel costs also improving net economics sequentially, we see near-term positives for Maersk in Q2e. However, with a hefty orderbook and little respite from any resurgent demand, we remain bearish longer-term. We reiterate our HOLD, but have raised our target price to DKK14,200 (12,100).

A. P. Møller Mærsk (Hold, TP: DKK12100.00) - Rapid unit cost response

Maersk’s Q1 results were supported by unit cost improvement, partly offsetting the 26% QOQ drop in average loaded freight rates. We maintain our negative view on container market prospects and believe the recent bounce in rates is driven by synthetic supply impulses to be regarded with suspicion. We note the bleak macroeconomic environment and mass tonnage influx from the record orderbook have yet to materially affect the market, which is already struggling with net spot freight rates below pre-...

Northern Lights

Northern Lights

A. P. Møller Mærsk (Hold, TP: DKK12400.00) - Optimism seems unwarrante...

We find no reason to believe box rates should see support from fundamentals any time soon, rather that the recent bounce in rates was a passing opportunistic attempt by liners to strengthen their hand in contract negotiations. The record orderbook has barely made an impact and inefficiencies remain, the implications being that utilisation and revenues should head south from here. Maersk remains solid, but its buybacks will be tested during 2024 in our view. We reiterate our HOLD, but have cut ou...

Generally an optimistic bunch

DNB hosted its 16th annual Energy & Shipping Conference. On day two, we hosted sector panels and presentations for dry bulk, LPG, car carriers, LNG and tankers with senior management representatives from 29 shipping companies. A resurging Chinese economy coupled with tight supply outlook, strong demand growth potential and regulations putting pressure to remove older vessels were among the common themes. Overall, the discussions showcase optimism across the sectors.

A. P. Møller Mærsk (Hold, TP: DKK16300.00) - Necessary solidity

Maersk shares see-sawed intraday as investors absorbed the implied 18% downside to 2023 EBITDA consensus from its guidance. We believe Maersk’s solidity (net USD12.6bn cash position) is key, considering the towering c30% orderbook-to-fleet ratio compressing utilisation from 88% in 2021 to an all-time low of 73% for 2024e. It expects to re-leverage the balance sheet as it continues with share buybacks. We reiterate our HOLD but have raised our target price to DKK16,300 (16,100).

Northern Lights

Record lows straight ahead

The eventual delivery of a towering orderbook currently at ~30% of the fleet has been in the offing for some time. Still, the implications of the resulting oversupply could be overwhelming for several of the stakeholders in the industry as we foresee record-low utilisation by 2024e. We believe once-strong balance sheets will be tested in order to find an equilibrium and the lowest-cost providers will be the ones left standing, with a 5% annual demand boost needed to even the balance by 2026e. We...

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