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Neptune Orient Lines: End of another Singapore icon

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In a month in which SGX-listed Haw Par Corp announced the closing of the Underwater World Singapore, Temasek Holdings tendered all their shares and paved the way for French giant, CMA CGM to take Neptune Orient Lines (NOL) private. This marked the end of another Singapore icon and highlighted how fragile the economy is right now.

The take-over offer for NOL is $1.30 and it is unconditional. According to the listing rule, NOL can be delisted once it obtains more than 90% of the shares. The offer is deemed by many to be fair given that NOL has been bleeding for several years due to the collapse of the Baltic Dry Index (BDI). Temasek Holdings had been looking for a white knight for NOL for quite some time and CMA CGM came to the rescue.

The downturn in the shipping industry took many players by surprise. After all, the BDI stormed to 11,000 level in 2007 and subsequent crashed to near 700 level with the arrival of the Great Financial Crisis. Nevertheless, the downturn turned out to be much longer than expected and its seems that Temasek Holdings, which is the parent company of NOL, decided to throw in the towel.

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To continue playing the game, Temasek Holdings must invest more capital to increase the scale of operations within NOL by buying more container ships. The economy of scale is needed to offset the devastating effects of the low BDI levels. Otherwise, NOL simply has no chance to compete against other global players in the midst of cut-throat freight rates. This was the rationale when NOL acquired APL for a cool $825 million back in 1997.

Temasek Holdings’ decision to sell NOL could be a turning point for the shipping industry. Given that NOL is our national carrier, its sale could have a huge bearing. Could this situation be salvaged if there were right business leaders in NOL? Probably so, but in the world of business, sentiments count for nothing. Nobody like to lose money in business and in Singapore, cases of turnaround successes in SGX stocks are very rare.

That is why Singaporeans who invest in SGX shares should not assume they can simply buy and hold government-linked shares forever. There are always counter-party risks involved when it comes to equities because of the possibilities of companies being forced to de-list, hostile take-over and bankruptcy. This is part and parcel of business cycles.

Investors should always make it a point to spread their investments across several asset classes that do not share the same risks as stocks. In this regard, physical gold is one of the best forms of wealth diversification that investors should consider buying. This is because during times of market corrections, physical gold bullion has always been regarded as safe haven.

To build wealth with gold, it makes sense to buy gold bullion in Singapore because of the business-friendly government policies which aim to transform the nation into a precious metal trading hub. To support this goal, investment-grade bars and coins are exempted from GST in Singapore. There are also no reporting requirements for buying, selling and storing of gold bullion to the taxman.

In Singapore, you can choose to buy physical gold from BullionStar, one of the largest online bullion dealers with a store-front shop at 45 New Bridge Road. With BullionStar, you can choose to buy gold or silver bullion online and have them delivered to your home or put them into ‘My Vault’ storage in BullionStar’s secure vault storage facility. Alternatively, you can choose to walk in and buy gold and other precious metals at BullionStar shop and showroom premises.

Setting up an online account is pretty simple and you can choose to pay in different currencies, including Singapore dollar and Bitcoins. In addition, the price is very transparency as BullionStar’s website displays the price premium and spread for each bullion. This allows buyers to make price comparisons online before making the purchase.

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SG Wealth Builder

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Updated: June 25, 2017 — 6:33 am

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