Like sharks circling the castaways from a foundering ship, savvy investors are swarming around the dozens of Scandinavian shipping stocks that plunged during this summer's upheavals on European currency and securities exchanges.
The widespread panic in financial markets prompted knee-jerk dumping of most Scandinavian shipping stocks, depressing their prices by an average of 40 percent on the bourses of Copenhagen, Denmark; Oslo, Norway, and Stockholm, Sweden. Because those countries appeared to be buckling under moribund economies, ballooning budget deficits, crippling interest rates and free- falling currencies, their shipping companies were presumed to face equally dire straits.But more sober analysis of the shipping industry's fundamentals has since suggested to many observers that Scandinavia's maritime shares will begin to recover their lost value by year-end, stockbrokers and shipping executives said Wednesday.
"We recommend that investors go ahead and buy a diversified portfolio, say, three months from now," said Roland Jonsson, chief of research for investment bankers Hagglof & Ponsbach of Stockholm.
Investors face a golden opportunity - and steamship lines see a silver lining - in the decline of Scandinavian shipping shares, Mr. Jonsson and other insiders agreed.
(Peter G. Stokes, director of Maritime Consultants Ltd. in Surrey, England, and a columnist for Lloyd's List of London, is pulling together a "hedge fund" to invest in overlooked shipping-related stocks and options. Story, Page 12A.) In Copenhagen, shrewd investors are hovering over what many analysts say are the undervalued, blue-chip shares of J. Lauritzen Holdings A/ S, a leading carrier of refrigerated cargoes, and D/S 1912 and D/S Svendborg, the twin "mother companies" for the A.P. Moller Group's massive holdings in containerships, tankers, oil and gas.
Among the shares traded on the Stockholm Stock Exchange, some analysts are projecting a strong recovery this winter for at least three other shipping companies: Argonaut AB, ICB Shipping and Nordstrom & Thulin AB.
Although Argonaut's tanker fleet has a net asset value of more than 30 Swedish kronor a share, for example, turmoil in financial markets and overcapacity in oil shipping has depressed its stock to as little as 13 kronor a share. As markets settle and excess tankers are scrapped over the coming year, however, Argonaut shares should recover, analysts said.
"If the market performs better later this year," Hagglof & Ponsbach's Mr. Jonsson said, "the 13 kronor price becomes a very good play."
Still more opportunities - and risks - lie among the more numerous Norwegian shipping stocks traded on Oslo's exchange, analysts there confirmed. Liquefied gas carrier D.Y. Bergesen A/S, chemical carrier Storli A/S and tanker operator Leif Hoegh & Co. A/S are among the strongest of about a dozen shipping companies trading at half their net asset value, analysts said. Bergesen's shares, which this year plunged from 145 Norwegian kroner to 62 kroner, "could easily double" back to their former value by next autumn, one analyst said.
"I think many investors are still looking at our stock exchanges in a general - or political - way," said Dag Brekke, shipping stock analyst for Svenska Handelsbanken of Stockholm, Sweden's largest bank. "We are focusing on large shipping stocks, based on fundamentals."
Stock traders' optimism is shared by many shipping executives.
"All the shipping stocks are down, but I would say it is an overreaction," said Hans J. Hjelde, the senior U.S.-based executive of Wilh. Wilhelmsen Ltd. A/S, of Oslo, which operates both tanker and roll-on, roll-off vessels. "We feel very confident . . . that the market will pick up sooner than people expect."
That contrarian scenario is attracting speculators of every stripe, from conservative institutional investors to risk-taking fund managers, to snap up big stakes in previously overlooked shipping stocks.
The "smart money," including Scandinavian shipping executives, investment bankers and institutional investors, already has snapped up blue-chip stocks at bargain-basement prices. More cautious individual investors, having ''learned their lesson" from the overbuilding of tankers in the late 1980s, are hanging fire until seasonal fuel shipping picks up later this fall.
"The time to invest is when stocks are low and everybody is gloomy," Wilhelmsen's Mr. Hjelde said. "If you want to invest long-term, I think you can find some very, very good buys in the Scandinavian market today."
Even the chief financial officers of steamship lines, who are prohibited by securities law from commenting on the value of their own shares, acknowledged the broad undervaluation of many maritime stocks traded in Scandinavia.
"Shipping stocks do go up and down; so do ours," said Michael Fiorini, executive vice president of finance for the A.P. Moller Group, based in Copenhagen. "But our performance is much more stable than the typical shipping company, due to our financial strength and diversification."
Since their heyday in Viking times, Mr. Fiorini noted, Nordic seafarers have developed vast, diversified empires spanning the planet. The largest fleets tend to straddle many industry sectors, operating a mix of oil and chemical tankers, containerships, breakbulk vessels, ferryboats and other craft. They also work in many geographic markets, offsetting losses from regional traumas such as Europe's currency crisis with steady cash flow from fast-growing regions like South America.
Scandinavia's steamship lines should post higher profits next year, analysts added, after they scrap or idle their excess capacity. Carriers also could benefit from continued depreciation of Nordic currencies, because their
dollar-denominated revenues would translate into larger kronor-based profits.
"To buy into blue chips like Bergesen is a way of playing the U.S. dollar yo-yo," Svenska Handelsbanken's Mr. Brekke said. "After the dollar appreciated toward the Norwegian krone, we saw a 20 percent increase in Bergesen's share price in one week's time."
SELECTED SCANDINAVIAN SHIPPING STOCKS
in Danish kroner (5.47 kroner = $1.00)
COMPANY Sept. 25 Close 1992 Low 1992 High
J. Lauritzen A/S 1,500 1,440 2,100
D/S 1912 (A.P. Moller) 74,000 68,000 106,500
D/S Svendborg (A.P. Moller) 101,000 98,200 154,500
East Asiatic Co. 67 52 176
in Norwegian kroner (5.74 kroner = $1.00)
D.Y. Bergesen A/S 80 62 145
Leif Hoegh & Co. A/S 56 45 90
Storli A/S 72 63 136
Wilh. Wilhelmsen Ltd. A/S 43 40 93
in Swedish kronor (5.30 kronor = $1.00)
Argonaut AB 17 13 50
Frontline AB 12 10 70
ICB Shipping 43 38 80
Nordstrom & Thulin AB 22 18 39
SOURCE: Financial Times, London; Hagglof & Ponsbach, Stockholm; Hoare Govett Ltd., London; Marine Money International, Greenwich, Conn.
Doug Pinkerton / Ian Thornell / Journal of Commerce