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Is Neptune Orient Lines Ltd A Sunken Wreck Or Buried Treasure?

 The five largest industrials in the FTSE ST Midcap cover a range of areas in the industrial sector. The five companies are shipbuilder Yangzijiang Shipbuilding (SGX: BS6), provider of delivery services Singapore Post Limited (SGX: S08), transportation firm Neptune Orient Lines Limited (SGX: N03), infrastructure provider SATS Ltd (SGX: S58) and electronics manufacturer Venture Corporation Limited (SGX: V03).

Yangzijiang is the largest of these five companies with a market capitalisation of over S$4.5b. If we, for now, ignore Neptune which has suffered losses of late, Yangzijiang is the only one to trade with an earnings multiple below the market average.

Trading at just below eight times earnings, compared with multiples of around 20 to 30 for the remaining three firms, it is the only company that appears to represent a genuine value opportunity for investors.

Adding to the allure of Yangzijiang is a decent dividend yield of 4.2% that is bettered only by Venture Corporation with a yield of over 6%. Venture Corporation, capitalised at S$2.1b is the smallest of the five and possesses an unappealing price to earnings ratio of 23. This makes Venture seem quite expensive and is, thus, unlikely to draw value investors away from Yangzijiang.

The final metric to asses is the price to book. None of the five companies mentioned trade below their book value. Even Yangzijiang which could appear as a value opportunity form the other metrics trades at a 20% premium to its book value. This may lead value investors to sit back and wait for a better buying opportunity, rather than pile in straight away.

Neptune Orient Lines has suffered in recent times due to falling freight rates and an industry wide overabundance of ships. Neptune has also recently announced that it is exploring the possibility of selling the logistics arm of its business to focus on the liner side of its operations.

Neptune has been unfortunate to find itself in the wrong place at the wrong time. But it will be interesting to see if it can turn around its fortunes if global shipping recovers.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.