Updating On Maersk After A 5% Drop - Let's Look At 2024-2025E

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Maersk is attractively priced despite recent volatility, with a 15% annualized RoR expected due to strong fundamentals and strategic initiatives.The current dockworker strike is seen as a short-term ...

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Moeller-Maersk A/S","AMKBY":"A.P. Moeller-Maersk A/S","AMKBF":"A.P. Moeller-Maersk A/S"},"translate_title":"马士基股价下跌5%后的最新情况-让我们看看2024-2025年预计","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMKAF":0.9,"AMKBF":0.9,"AMKBY":0.9},"content_text":"Maersk is attractively priced despite recent volatility, with a 15% annualized RoR expected due to strong fundamentals and strategic initiatives.The current dockworker strike is seen as a short-term tailwind, likely to increase shipping rates and benefit Maersk's profitability.Maersk's recent quarterly results show strong EBITDA growth, improved cost base, and strategic progress, reinforcing its position as a leading logistics player.With a target price of 13,500 DKK, Maersk is a \"BUY\" due to its undervaluation, solid dividend, and promising future prospects.Trygve Finkelsen/iStock Editorial via Getty Images Dear readers/followers, I was approached this morning and asked to do a fresh review of Maersk (OTCPK:AMKBY), a company that I've been investing in for a few years at lows, and where I now believe the company is actually attractively priced. Given that it's a shipping company, it's entirely expected that trends are going to be volatile here - no surprise in the latest trends here, either. I last updated on Maersk before summer back in February in an article that you can find here. At the time, we were actually seeing some impacts even up north from the Canal blockage that was relevant at the time, with shortages in fuel and other goods as the Suez Canal issues started ramping up. This is now over, but instead, we have other challenges. I want to say that prior to today's drop, the company was actually doing quite well given my overall PT and the performance that I had \"gotten\" out of the company at the time - but now we're slightly down to below S&P500 levels again. It shows you how the volatility can work against you in times like these. Seeking Alpha Maersk Article (Seeking Alpha Maersk Article) In this article, I mean to update my thesis on Maersk and show you why I believe this company offers a decent case for a good return. I don't expect the insane dividend levels to come back - but I do expect a 15% annualized RoR here, and I'll show you why. Maersk - An upside, and with today's news you have an opportunity to \"get in\" cheaper As I am writing this, Maersk is down around 5.5% in trading, looking at the company's ADR. The reason for this is fairly straightforward - it's a dock strike. There's a dockworker strike currently starting that will affect the supply chains of many organizations and companies. It's limited to the US for the time being, and specific for those relying on East Coast locations and the Gulf-located ports. Most of the shipping-specific businesses are down in response, not only Maersk. The recent set of news calls for 45,000 dockworkers at this coast to go on strike early this morning, with a \"modest\" demand of a 77% wage increase over 6 years' time. I'm no stranger to strikes myself - though I will say they're rare in Sweden. Collective bargaining has made strikes a very rare occurrence here. What I do think is very common across most employment areas and in most nations is that ultimatums like the one currently put forward - \"getting\" 77% over 6 years to even start talking - is not going to work - though this is an assumption from me, not anything I'm \"betting\" money on. The exact effect of this and its length remains of course to be seen - but the companies are already responding as expected, with both Maersk and Hapag-Lloyd starting to implement or planning to implement significant surcharges for reefers/containers. Of course, the market is an event-driven place - so longer-term considerations are not currently being made by many analysts. Let me be the one to make these, regardless of what happens here with the strike. I believe this could end up being positive. One of the things that drove up shipping prices in the past few years when they peaked was limited capacity and increased demand. If we're moving to a situation where this, even only slightly, happens again, then we're not unlikely to see higher freight rates which would not only benefit Maersk but also other logistical players along the chain, such as DHL (OTCPK:DHLGY), which I also happen to own stock in. Let's also look at recent quarterly results. Remember that in my last article, I was positive - and this has largely materialized. The strong market demand saw EBITDA growth as a result across every single segment, with a recovery in operating income in Ocean, Logistics and Services, and Terminals. Maersk, in fact, increased its guidance, to an underlying EBITDA and EBIT of above 9B USD, upwards of 11B USD in EBITDA, and upwards of 5B USD in EBIT. FCF is also expected to go up to above $2B. Recovery is the 2Q24 name of the game. Maersk IR (Maersk IR) What you see is driven by demand, a much-improved cost base, progress toward the company goals in 2025E, superb contract business flow and rate impacts, very good elevated freight rates due to Red Sea rerouting (see, problems on the market actually increasing freight profits), and very good overall growth in Terminals as well. The company is also ramping up its automation and expansion investments. This automation push is one of the reasons the strike is happening. The writing is on the wall. Automation has been a \"thing\" for decades in this segment at this point. It has been illustrated both in reality and in fiction/media, such as the TV show The Wire during Season 2, centering around the Baltimore port. Unsurprisingly, the Baltimore port is also part of the strike (it being an East Coast port). In fact, one of the demands that the striking workers have is an \"automation ban\" (Source). I personally believe this to be monumentally unlikely to occur - because this is simply a move in the next natural direction. In fact, for Maersk, it's part of the strategic transformation. Take a look. Maersk IR (Maersk IR) Maersk is in line with most of its strategic priorities - and even the current strikes aren't going to change this significantly. The company's three segments are all seeing good trends and progression towards priorities. Maersk is progressing nicely on its fleet renewal program, and has already ordered 800,000 TEUs for delivery in 2026-2030, ordered this year alone. The company continues to manage its profitability and yields, while bringing down the costs for ocean freight, despite the disruptions that we've been seeing. Meanwhile, Terminals are becoming interesting. Growth investments in Croatia and Suape are showing results, and we can expect these to go live on time and on budget (for the time being) in 1-2 years. The company is also continuing to upgrade its hubs, with the final 3 hubs now prepared for the upgrade. Here's the company's estimated impact of the disruption from the Red Sea. Maersk IR (Maersk IR) But in the end, be it disruptions from the Red Sea, or it strikes like the one we seem to be getting into now, I view these as only momentary and small sets of noise that we're going to get past. Yes, it may, in fact, be one of the largest-scale longshoremen work stoppages in over 40 years, but I don't see much coming out of it even if they do manage to (and I have no doubt they will) influence the SCM for entire regions. Let's see what valuation shows us after what I deem to be an excellent 2Q24 quarter, with plenty of positive promise going forward here. Maersk Valuation - Plenty to like, especially now that valuation's down 5% The company trades under the native ticker Maersk-B on the Copenhagen Stock Exchange. That's also, by the way, the ticker I recommend looking at before anything else. Fundamentally speaking, Maersk is in an excellent position. The company has BBB+ credit, less than 19% long-term debt/cap which makes it one of the most conservatively leveraged businesses in the shipping sector, and a native yield of around 4.6% here, around what we're seeing as the trough levels today. So from that perspective, trends and valuation look fairly good here. Also, the company trades at less than 6.7x P/E - though I should also mention that the 3-year average is at a 4.37x P/E. You will likely have a very hard time evaluating this company on the basis of P/E. I'm looking at the native ticker for Maersk, and it's now down to less than 10,800 DKK. Now we're approaching levels that are becoming truly interesting. I want to reiterate - I in fact view this port strike as a short-term tailwind, likely to increase shipping rates and returns for companies like Maersk. I do not view it as a negative. Even the estimate that Maersk currently has communicated, where a one-week strike equals six weeks of actual port congestion, does not change my view. This will only drive demand. Just look at the Red Sea situation and what this has caused. Following Maersk's divestment of its energy and drilling business as well as towage, the company is a laser-focused logistics business and global shipper. I like Maersk as it's structured today - and that's before even talking about the Gemini cooperation. I've covered this before, but to summarize it quickly, it's a cooperation based on a hub-and-spoke model, the very first that's existed like this, between Maersk and Hapag-Lloyd. The fact that Maersk distributes between 30-50% of net income in dividends (underlying) means that shareholders that invest at a cheap price will be blessed with two forms of returns. First off, the capital appreciation as the share price moves up, and the dividend the company has proven us only a year or two ago that it would distribute. The upsides to the company, aside from Gemini, are very clear here. The investments made by the company in logistics and solutions will result in leveraged upsides in the oceans segment, capturing customer and total spending in the logistics field. This will increase margins, and the business mix that we're seeing here is a higher percentage of longer-term contracts, which allows for higher predictability of revenues, realization, and utilization. Risks for the company can really be counted on one hand. Even if the Company's new Gemini models are replicated by others, this does not negate the advantages Maersk has. Furthermore, it would take large players on the field to do this, and large players on this field like Maersk aren't that common. A real risk that I would validate is the company's long-term failure to improve earnings and margins in its logistics segment. The company may succeed in improving this - but it's an \"I'll believe it when I see it\" sort of situation. Beyond that, it's just freight prices and their volatility - which isn't Maersk-specific. I'm sticking to my PT of 13,500 DKK for the native share here, which makes it a \"Buy\" with over a 20% upside from this time. This also corresponds to a forward EV/EBITDA of 5-5.2x based on a 2025E EBITDA forecast of $7.5B, give or take a hundred million each way. The key for this estimate and for this thesis is Ocean, which is why I keep very close focus on this. My thesis for the company now, as of October 2024, is as follows. Thesis  This is one of the world's most important shipping companies. At a good valuation, this company is, to me, a no-nonsense \"BUY\" with no looking back. The flow of goods dictates the state of our national economies, which makes the company a major player in macro. Given the Gemini model, the company's renewal project for its assets, and the recent quarterly trends, I reiterate my positive stance for Maersk at this time. I view the company as undervalued in the face of what is an unprecedented logistic crisis, and even with the looming strike, I see very few downsides here. It's a \"BUY\" here to me - and I view it with a target of 13,500 DKK/share updated for late October of 2024. I intend to buy more in the company tomorrow when the market opens.  Here are my criteria and how the company fulfills them:  This company is overall qualitative. This company is fundamentally safe/conservative & well-run. This company pays a well-covered dividend. This company is currently cheap. This company has a realistic upside based on earnings growth or multiple expansions/reversions.  The company, therefore, fulfills all of my investment criteria here except that it is no longer really being \"cheap\" here, and still is a \"Buy\".  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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