Singapore's container shipping firm Neptune Orient Lines Ltd is likely to become acquisitive after coming firmly under the control of its state-owned parent Temasek Holdings Pte Ltd, analysts said.
Temasek held 68.64 percent of NOL, the world's seventh-biggest container shipping group, at the end of trading on Wednesday, according to financial adviser Goldman Sachs.
The $1.6-billion bid is the largest take over by the government's investment agency.
"(Temasek) have spent a truckload of money on an investment they already control. We have to wait to see what will happen next, but I don't think it will be so soon," said an analyst with a US investment bank.
Analysts expect NOL, which was set up in 1968 as Singapore's national shipping line, will be spurred on to become more acquisitive by Temasek which has stated an ambition to grow companies in its stable into major global players.
The state agency, which has been on a regional buying spree for banks and telecoms, controls most big businesses in Singapore and has stakes in large listed companies including Singapore Telecommunications Ltd, Singapore Airlines Ltd and DBS Group Holdings Ltd.
Christopher Gee, strategist at JP Morgan, said NOL shares still trade at a discount to its rivals as investors price in the prospect of future acquisitions.
"Everybody knows that NOL is cheap. The main difference is that it is seen as an acquisitive company. The market prices these things appropriately," said Gee adding that JP Morgan has a neutral rating on the stock.
At current levels NOL is valued at 3.6 times forecast earnings for 2004, compared with rival Dutch container shipping firm P&O Nedlloyd's 8.5 times, Taiwan's Evergreen Marine's 8.9 times and Yang Ming Marine's 6.8 times.
Analysts say while Temasek was unlikely to make any acquisitions in the near future as shipping stocks are at a high, supported by China's export boom and a tight supply of ships, it cannot be ruled out further down the road.
"I am quite sure they will be quite keen to grow it now that the balance sheet is much stronger," said Chris Wong, fund manager at Aberdeen Asset Management.
NOL has seen its fortunes turn around in the last two years as shipping rates soar. The consensus of analysts' forecasts is for a net profit of about $700 million for 2004 against a loss of $330 million in 2002.
Chris Sanda, analyst at DBS Vickers Securities, said NOL was on track to generate about $1 billion in free cash flow a year with the firm holding over $800 million in cash at the end of the second quarter.
NOL shares, which have been supported by Temasek's bid at S$2.80 a share, eased as the take over offer ended. It dropped three cents to close at S$2.76.