Drewry Financial Research Services has described Taiwan’s second largest containerline as the new Hanjin while slapping its stock as unattractive in a new report. Nevertheless, despite the huge wave of consolidation swirling the box sector, Yang Ming senior management remain defiant, saying they will not merge.
Drewry said Yang Ming “now takes the slot left vacant by Hanjin Shipping, as it has the most leveraged balance sheet in the industry”.
Yang Ming’s net gearing stood at 437% at the end of the third quarter last year, well above the industry average of 124% and nearly five times its closest regional peer, Evergreen Marine, and 12 times that of Wan Hai.
“[Yang Ming’s] high debt is a great cause for concern for us given the heightened financial risks. Even with recovery in the underlying freight market, the debt burden without a restructuring is a red flag and a clear sell signal for us,” Drewry said in a report.
The consultant said Yang Ming is an “apt candidate” for a government-backed shareholder bailout.
Yang Ming is the world’s eighth largest containerline with some 579,000 slots in its fleet.
Nevertheless, conventional wisdom today suggests global liners in the suddenly consolidated sector needs to be around twice this total to thrive, not that senior management at the Keelung-headquartered firm seem worried or pressed to change.
Yang Ming chairman Bronson Hsieh, formerly top dog at Evergreen, reiterated yesterday at a press conference that the line has no intention to merge.
“A merger has never been an option for Yang Ming, and it won’t be,” Hsieh said. “Over the past 10 years, the five shipowners with the highest profit margins have been smaller players. Smaller companies do not necessarily have to be merged,” he said.