MAERSK may again struggle to retain profitability this year given the exigencies of the current Sino-US trade war and rising oil prices that stand to damage the fortunes of the Danish shipping giant, reports Bloomberg.
Maersk has already lost almost a third of its market value this year as investors gird for more bad news, said Bloomberg. Protectionism means less demand, and history suggests the shipping industry will struggle to make the necessary supply cuts.
What's more, Maersk is now more exposed to the vagaries of shipping as it divests itself of energy interests, thus depriving itself of any benefit from a thriving oil market.
Per Hansen, an investment economist at Nordnet in Copenhagen, says Maersk is currently 'in the eye of the hurricane' when it comes to the damage that will be inflicted by a trade war. He estimates the company's shares could drop at least 10 per cent.
Maersk is already bracing itself for lackluster demand in the second half of the year, due to what it says are seasonal effects. The company said earlier in the week it will need to temporarily scale back its service between Asia and North Europe as a result.
'It's highly likely that Maersk's valuations could sink to its trough valuations in the coming months as investors avoid shipping stocks until more excess capacity is being removed,' said Singapore consultancy Crucial Perspective CEO Corrine Png.
'It will be 'harder for Maersk to pass on the higher bunker fuel costs effectively compared to last year, raising the risk that Maersk can only be marginally profitable, at best, or even turn loss-making for the full financial year,' she said.
'Maersk is the second-largest carrier in the Far East-North America trade lane, with 15 per cent market share, so falling China exports to the US due to tariffs will hurt Maersk's financial results going forward,' Ms Png said.
Bloomberg noted that a number of analysts have cut their outlook on Maersk. Kepler Cheuvreux lowered its share price target by nine per cent last week to DKK12,000 (US$1.881). Jefferies reduced its price target by 12 per cent to DKK11,500. Even so, of the 28 analysts covering Maersk, only one is recommending that clients sell the stock. The rest advise either buying or holding on to Maersk shares.
Maersk has already lost almost a third of its market value this year as investors gird for more bad news, said Bloomberg. Protectionism means less demand, and history suggests the shipping industry will struggle to make the necessary supply cuts.
What's more, Maersk is now more exposed to the vagaries of shipping as it divests itself of energy interests, thus depriving itself of any benefit from a thriving oil market.
Per Hansen, an investment economist at Nordnet in Copenhagen, says Maersk is currently 'in the eye of the hurricane' when it comes to the damage that will be inflicted by a trade war. He estimates the company's shares could drop at least 10 per cent.
Maersk is already bracing itself for lackluster demand in the second half of the year, due to what it says are seasonal effects. The company said earlier in the week it will need to temporarily scale back its service between Asia and North Europe as a result.
'It's highly likely that Maersk's valuations could sink to its trough valuations in the coming months as investors avoid shipping stocks until more excess capacity is being removed,' said Singapore consultancy Crucial Perspective CEO Corrine Png.
'It will be 'harder for Maersk to pass on the higher bunker fuel costs effectively compared to last year, raising the risk that Maersk can only be marginally profitable, at best, or even turn loss-making for the full financial year,' she said.
'Maersk is the second-largest carrier in the Far East-North America trade lane, with 15 per cent market share, so falling China exports to the US due to tariffs will hurt Maersk's financial results going forward,' Ms Png said.
Bloomberg noted that a number of analysts have cut their outlook on Maersk. Kepler Cheuvreux lowered its share price target by nine per cent last week to DKK12,000 (US$1.881). Jefferies reduced its price target by 12 per cent to DKK11,500. Even so, of the 28 analysts covering Maersk, only one is recommending that clients sell the stock. The rest advise either buying or holding on to Maersk shares.