After
a
disappointing
2023,
in
which
the
shipping
giant underperformed
the
Morningstar
Europe
All
Cap
index,
the
first
week
of
the
new
year
has
been
a
different
story.
The
Danish
company
has
already
set
sail
for
a
top
share
price
ranking,
advancing
15.1%
amid
the
re-routing
of
vessels
following
attacks
in
the
Red
Sea.
Freight
rates
are
rocketing.
Recent
events
are,
however,
relatively
immaterial
for
Morningstar’s
outlook
on
the
stock.
European
market
strategist
Michael
Field
highlights
a
fair
value
of
17.600
Danish
kroner
on
the
stock
with
a
High
Uncertainty
Rating,
indicating
it
is
undervalued
by
around
20%.
He
does
not
award
the
stock
a
Moat
Rating
mostly
due
to
its
core
businesses,
ocean
and
APM
Terminals,
frequently
being
subjected
to
significant
competitive
pressures.
Why
is
Maersk
Grabbing
The
Headlines?
The
ongoing
attacks
on
commercial
ships
in
the
Red
Sea
by
Iran-backed
Houthi
rebels
has
resulted
in
chaos
for
the
world’s
supply
chains.
That
prompted
many
ships
to
reroute
from
the
Red
Sea,
which
is
a
critical
gateway
to
the
Suez
Canal,
itself
a
vital
trade
link
connecting
Asia
and
Europe.
The
new
route,
past
the
Cape
of
Good
Hope
in
South
Africa,
makes
journeys
longer
and
more
expensive.
Around
15%
of
the
world’s
seafaring
trade
passes
through
the
Red
Sea
on
its
way
to
the
Suez
Canal
and
into
the
Mediterranean.
MSC,
the
largest
container
shipping
company,
said
in
mid-December
it
was
avoiding
the
Red
Sea.
Maersk,
the
second-biggest,
controlling
about
one-sixth
of
global
container
trade,
temporarily
halted
transits
of
the
Red
Sea
before
returning
to
the
area
in
late
December.
In
the
last
week
it
has
once
more
pulled
back
after
one
of
its
vessels
–
the
Maersk
Hangzhou –
was
attacked.
The
detour
around
Africa
increases
the
journey
by
at
least
10
days.
As
a
result,
shipping
prices
have
soared:
Asia
to
Europe
prices
have
nearly
doubled
since
mid-December
to
more
than
€4,000
(£3,146)
per
40-foot
equivalent
unit
(FEU),
Freightos
data
showed
as
of
January
3,
according
to
Reuters.
Are
There
Any
Positives
About
Shipping
Disruption?
Soaring
shipping
prices
have
almost
inevitably
got
investors
to
push
the
stock
price
of
shipping
companies
higher,
something
that
we
probably
wouldn’t
have
seen
in
a
normal
year.
Morningstar’s
senior
equity
analyst
Michael
Field
explains
over-capacity
is
now
so
bad
that
anything
giving
investors
hope
of
a
better
margin
leads
to
a
huge
spurt
of
interest.
“As
firms
got
greedy
and
started
putting
in
orders
to
take
advantage
of
the
rising
demand
during
the
pandemic,
we
then
ended
up
in
the
same
cycle
where
there
is
too
much
capacity,”
he
says.
“That
is
where
we
have
been
in
the
last
year,
up
until
the
attacks
in
the
Red
Sea”.
The
shipping
industry
had
“a
terrible
decade”
prior
to
the
pandemic,
only
to
then
see
capacity
suddenly
squeezed
and
prices
exploding.
As
a
result,
Maersk
made
more
in
2021
than
it
did
in
the
entire
decade
prior.
It
then
made
even
more
in
2022.
But
in
November
2023
the
story
changed.
In
its
earnings
report
for
the
third
quarter
Maersk
said
it
was
cutting
10,000
jobs
following
a
steep
drop
in
third-quarter
profit
in
the
face
of
overcapacity.
For
Field’s
part,
he
thinks
that,
for
all
its
industrialised
effort,
shipping
is
a
fragile
business.
“The
margins
between
profit
and
loss
are
extremely
fine
in
this
industry,”
he
says.
“If
there’s
just
a
few
too
many
vessels,
it
throws
it
all
out
of
balance
and
the
price
of
freight
falls.
Similarly,
if
there
is
a
squeeze,
like
the
one
we
are
seeing
now,
and
a
tight
overdemand,
the
price
goes
through
the
roof.”
How
Long
Could
Maersk
Benefit?
In
the
last
year
investors
have
shown
little
interest
in
Maersk
and
many
other
shipping
companies.
The
consensus
has
been
it
will
take
around
two
to
three
years
for
the
sector
to
recover.
“Only
a
few
months
ago
freight
rates
were
at
a
level
where
some
firms
were
actually
making
a
loss
on
freight.
Any
boost
from
that
level
makes
a
huge
difference,
since
it
literally
means
the
difference
between
profit
and
loss,”
Field
explains.
As
long
as
the
disruption
and
accompanying
higher
freight
prices
remain,
the
less
time
until
supply
and
demand
are
rebalanced
again.
“If,
for
example,
it
went
on
for
six
months,
that
would
mean
six
months
less
of
negative
pricing,
and
instead
six
months
of
them
actually
making
money,”
he
says.
Although
there
is
no
evidence
the
disruptions
in
the
Suez
Canal
will
last
for
six
months,
Field
argues
it
is
more
likely
to
take
around
three
or
four
months
for
the
situation
to
settkle.
That
means
three
or
four
months
with
higher
freight
rates
to
compensate
for
less
capacity
on
the
market.
Morningstar
Key
Metrics
For
Maersk
• Fair
Value
Estimate:
17.600
Danish
Kroner;
• Morningstar
Rating:
4
Stars;
• Morningstar
Economic
Moat
Rating:
None;
• Morningstar
Uncertainty
Rating:
High.
SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk
