Hapag-Lloyd — Update 8 April 2016

Hapag-Lloyd — Update 8 April 2016

Hapag-Lloyd

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Hapag-Lloyd

Resilient maiden results

Industrial transportation

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8 April 2016

Price

€16.29

Market cap

€1.9bn

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Share details

Code

HLAG

Listing

Frankfurt

Shares in issue

118.1m

Business description

Hapag-Lloyd is Germany’s largest container liner shipping company and is world leading in terms of global market coverage. Following integration of CSAV, the fleet offers a total transport capacity of almost one million standard containers (TEU), as well as a container fleet of 1.6 million TEU.

Bull

Globally balanced exposure provides resilience in challenging markets.

Significant cost savings yet to be fully reflected in results, further programmes commenced.

Improved capital structure following IPO: net debt of €3.3bn, net debt/equity at 66.1%.

Bear

Continued rate pressures experienced in 2015.

Relatively low free float (15.5% at 31 December 2015).

Global economic volatility can influence demand.

Analyst

Roger Johnston

+44 (0)20 3077 5722

Hapag-Lloyd reported a resilient maiden set of FY results since listing in November 2015, despite challenging market conditions. The results highlighted the benefits derived from its merger with CSAV and subsequent efficiency programmes. Having delivered as promised in 2015, the group is positioned to retain a top five market position while enhancing value through a series of efficiency programmes and fleet optimisation moves that will improve both customer focus and earnings quality.

2015 results resilient despite challenging markets

Hapag-Lloyd’s maiden results since listing demonstrated a resilience despite a challenging and busy 2015: new management appointments (CFO, CCO); further fleet evolution (five new vessels ordered, seven delivered and 16 older vessels retired); improved capital structure through refinancing and IPO; integration between Hapag and CSAV completed ahead of schedule in Q315 with run rate net synergies of US$400m already achieved, 65% of which benefited FY15; and the launch of the Octave 2 efficiency programme following US$200m savings achieved through the original Octave programme. All these allowed a first net profit (€114m) to be delivered since 2010, signalling a successful earnings turnaround.

Positioned to deliver further value growth

Hapag-Lloyd is now positioning to deliver further value and 2016 has started no less busy, with the commencement of the roll-out of the group’s Compete to Win programme while further fleet optimisation continues. With supply/demand signals indicating markets may gradually improve and with an accelerating M&A and alliance landscape likely to provide medium-term stability, Hapag is ensuring it is taking those actions within its control to maintain its sector-leading margins.

Valuation: Well-balanced top five player

With a balanced exposure to global trade following the merger with CSAV, Hapag-Lloyd is positioned to be resilient in the face of evolving global demand imbalances while it also benefits from strong niche propositions where further strengthening is targeted. Efficiency programmes continue and, with the balance sheet to optimise the fleet to maintain its modern and competitive structure, Hapag has driven a 20% decrease in transport expenses per TEU, with further benefits set to come through at full run rates. We believe that the current rating of 10.2x CY16 EPS, a c 25% discount to larger peers, does not yet fully reflect this strong structural positioning.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

8,842

139.1

1.06

0.00

15.4

N/A

12/16e

8,754

189.1

1.59

0.31

10.2

1.9

12/17e

9,059

305.4

2.52

0.64

6.5

3.9

12/18e

9,109

309.3

2.81

0.89

2.6

5.5

Source: Bloomberg, 6 April 2016

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US

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New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

LGO Energy — Update 8 April 2016

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