Drewry advises Hapag-Lloyd IPO subscription

The German ocean carrier’s initial public offering valuation is affected by the underperforming container shipping market and underplays the company’s operational strength, according to the maritime consultant’s equity research division.    Drewry Equity Maritime Research on Wednesday advised investors to subscribe to the liner carrier Hapag-Lloyd’s initial public offering.
   The carrier said earlier this week it has received bids for all shares through the IPO, which runs through Oct. 27, when shares begin trading on the Hamburg and Frankfurt stock exchanges.
   Drewry said that although the near-to-medium term outlook for the container shipping industry is marred by oversupply for the foreseeable future, “Hapag Lloyd’s well-diversified presence across routes reduces the risk from the slump on a particular trade lane.
   “The company is among the top five liner companies in capacity terms, and its large scale of operations accompanied by synergies from cost saving programs will ensure that it remains profitable despite the challenging business environment,” added Drewry.
   Some analysts questioned the German carrier’s decision to press ahead with an IPO given a lower-than-expected valuation, but Drewry suggested that could play in the favor of early investors.
   “Much of the underlying sector disappointment has been discounted in the price,” said Drewry analysts Rahul Kapoor and Nilesh Tiwar. “We see the offering as attractively priced, providing an opportunity to take exposure in one of the largest and financially sound container shipping companies. Even as meaningful upside in the short term and sector recovery on the ground remain elusive, DMER believes the current valuations are likely to provide a floor to the share price and gradually create value for its shareholders.”
   Drewry is estimating that Hapag-Lloyd’s fair value is 40 euros per share, a 40 percent upside on the lower end of the IPO price range (set at 23 euros to 29 euros per share).