Shareholders of Japan’s three largest public shipowners hoping for a hefty payout on the back of the red-hot containership market might be disappointed, a top analyst has warned.
Ocean Network Express (ONE) is expected to have a dividend payout ratio of 30%, according to Nomura Japan transport analyst Masaharu Hirokane.
“We previously assumed that NYK Line and Mitsui OSK Lines would increase their dividend payout ratios from around 25% and around 20%, respectively, at present to around 30% from FY2023 onwards,” the Tokyo-based analyst said.
“But we now think they will keep their dividend payout ratios at their current levels and use dividend income from ONE to bolster their balance sheets for a while.”
Hirokane said none of ONE's three shareholders have “particularly solid parent balance sheets”, with nonconsolidated shareholders’ equity ratios at the end of the current financial year of only 18.7% at NYK Line, 19.1% at MOL and 8.2% at K Line.
The Nomura analyst estimated that ONE had shareholders’ equity after dividend payouts of $5.3bn at the end of the 2021 financial year and expects this to rise to $13.2bn at end of the FY2022 financial year.
“ONE is effectively debt free, with no borrowings from financial institutions, and the majority of its shareholders’ equity consists of cash and equivalents,” Hirokane said.
“The company is currently drawing up a medium-term plan and looks to be talking to its three shareholders about how much cash it will need for investment purposes.”
In March MOL, NYK Line and K Line received a total of $500m in dividends from ONE for the 2020 financial year, according to industry analysts.
NYK Line, as ONE's largest shareholder with a 38% stake, received roughly $190m, while MOL and K Line each received about $155m, reflecting their 31% stakes.
The total dividend equated to a payout ratio of roughly 20% of ONE’s net profit for the full financial year, according to analysts at Japan’s Mizuho Securities.
In late July, MOL raised its full-year dividend per share (DPS) forecast to ¥550 ($5), while NYK Line raised its DPS from ¥200 to ¥700.
K Line remains the one uncertainty among the big three shipowners, with the company continuing to leave its dividend forecast undecided.