Company Reports

DSV announced it will be acquiring 100% of Schenker for EUR 14.3 billion, financed with EUR 4.0 billion-EUR 5.0 billion in equity and the rest via debt financing. The deal is pending approval by Deutsche Bahn's supervisory board and the German Federal Ministry for Digital and Transport, with both decisions expected in coming weeks. Management expects the deal to close during the second quarter of 2025, pending regulatory approval. The transaction multiples correspond to enterprise value/sales of 0.77 times and EV/EBIT of 14.0 times based on the financials of the last 12 months ending June 2024 versus EV/sales of 1.81 times and EV/EBIT of 16.26 times for DSV, a sign the acquisition may be value-accretive.

Following its acquisition of GIL in 2021, DSV became the third-largest third-party logistics provider globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its operations.

Narrow-moat DSV's stock price moved in step with peer Kuehne+Nagel following mixed results in a challenging market environment; the latter reported earnings on July 23. After a decline in revenue in the first quarter, organic revenue rose by 10% in the second quarter, driven by a recovery in demand for air freight. On a negative note, EBIT did not grow in line with revenue after it fell 12% year over year, highlighting the double-edged sword that is operating leverage. We reiterate our DKK 1,120 fair value estimate and see shares as overvalued currently.

As with peer Kuehne + Nagel on April 23, narrow-moat DSV’s first-quarter results contained some bright spots but not enough to avoid disappointing investors, with the shares down midsingle digits on the day. Revenue was down just 6% over the period, but profits fell by almost 30%. We reiterate our DKK 1,120 fair value estimate and see moderate upside from the prevailing share price.

The good news for narrow-moat DSV is that the decline in revenue witnessed over the last year or so is slowing. In the fourth quarter of 2023, revenue fell by a little over 30%, better than the 40% decline measured at the last update. Clearly, the firm is not out of the woods yet, though, as it looks like the current malaise in shipping markets will last for some time longer. We reiterate our DKK 1,120 fair value estimate and see the shares as fairly valued currently.

Following its acquisition of GIL in 2021, DSV became the third-largest third-party logistics provider globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its operations.

Despite DSV reporting a revenue decline of 40% year over year for the third quarter, relative to the global decline in freight volumes, we believe its performance was reasonable. The asset-light nature of the third-party logistics business also meant that narrow-moat DSV’s EBIT fell by one third, a number that is slightly more tolerable. One positive that investors should take from this update is that management tightened the full-year guidance range for EBIT by raising the lower end. We reiterate our DKK 1,120 fair value estimate and see the shares as fairly valued currently.

With Kuehne+Nagel and DSV, two giants of the logistics industry, reporting on the same day we get an excellent insight into the current state of the global shipping market. It’s telling when the two companies report EBIT down year over year between one third and one half and entitle the announcements a “very good result” and “solid financial performance.” Relative to their respective fair value estimates, we believe the shares of both are currently overvalued.

Narrow-moat DSV’s first-quarter update was a huge climbdown from the highs of 2022, but broadly in line with what we expected. Revenue fell by one third as lower volumes combined with declining freight rates. Management maintained their full-year guidance for EBIT, which represents about a 30% fall at the midpoint on 2022. We also maintain our forecasts and reiterate our DKK 1,120 fair value estimate. We see the shares as fairly valued currently.

The rally in narrow-moat DSV's shares on Feb. 2 had less to do with the company's 2022 performance, which was strong, all things considered, and more to do with the outlook for 2023 relative to investor expectations. After the share price cratered in September 2022, investors are slowly coming around to the world’s number-three third-party logistics provider. While we expect to tweak our numbers on the back of 2022 results, we do not expect this to change our view on the stock. Relative to our DKK 1,120 fair value estimate, we believe the shares are now up with events.

Following its acquisition of GIL in 2021, DSV became the third-largest third-party logistics provider, or 3PL, globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its own operations.

For the first time since picking up coverage of the sector almost six years ago, third-party logistics, or 3PL, giants DSV and Kuehne + Nagel have reported quarterly earnings on the exact same day, giving us a unique snapshot into the current state of global shipping markets. The long and the short of it is that despite investors’ fears for 2022, it has been a bumper year. Better than that, Kuehne + Nagel have gone so far as to say that it has been its “best ever nine-month results”. Although container freight rates peaked this time last year, they have remained elevated relative to historical levels, allowing 3PL firms to generate sky-high profits this year.

As freight rates fall and capacity issues ease, DSV continues to deliver in 2022. Although numbers were skewed upward by the integration of GIL, the fact that management are once again upgrading full-year EBIT guidance to 10%, indicates the economic environment remains supportive, at least for the remainder of the year. While we expect to tweak our near-term estimates on the back of this update, we do not expect this to have a material impact on our DKK 1,120 fair value estimate. At current levels we view the shares as fully valued.

Although the first-quarter figures are skewed by the acquisition of Agility GIL, with revenue almost doubling year over year, one thing is certain, narrow-moat DSV’s strong performance in 2021, as a result of tight capacity in shipping markets, has continued into the first quarter of 2022. Despite the overhanging macroeconomic clouds, management was comfortable enough to raise full year guidance for 2022 by around 15% on an EBIT level. Although we expect to adjust our near-term forecasts marginally to reflect this, we do not expect it to have a material impact on our DKK 1,120 fair value estimate. At current levels we see the shares as being fully valued.

Following its acquisition of GIL in the third quarter of 2021, DSV became the third-largest third-party logistics provider, or 3PL, globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its own operations.

Back in late September 2021 we stated our belief that the supply chain crisis might persist until the middle of 2022. Full-year results from front-line shipping and logistics giants Maersk and DSV have confirmed our thesis, with the former now believing that normalisation of shipping markets won’t take place until the second half of the year. In the meantime, these companies are taking full advantage of tight capacity in shipping markets as a result of bottlenecks, with Maersk’s ocean business having delivered a return on invested capital of more than 45% in 2021, ahead of its long-term target of 7.5%, while the shipping industry as a whole has generated more profit in the last year than in the previous 10 years combined. While supply chain bottlenecks may subside in the second half of the year, causing downward pressure on freight rates, we fully expect another blowout year for shipping and logistics firms as these changes take time to filter through to the end client. Additionally, the large shippers have been steadily converting clients to longer-term contracts, under the existential threat of the market driving rates higher and shipping capacity becoming harder to come by. Maersk expects 70% of volumes to be shipped under long-term contracts in 2022, up from less than half before the coronavirus, with most of these contracts locked in at relatively hefty freight rates. This effectively means much of the input cost inflation we’ve seen across consumer and industrial products will likely persist for some time.

Narrow-moat DSV recorded a bumper year in 2021, and while its numbers were somewhat clouded by the acquisition of Agility GIL during the year, the trends in shipping markets were clear to see. DSV has taken full advantage of tight capacity, particularly in sea freight, to extract higher commissions from clients who are desperate to ensure delivery of timely shipments. Although shipping giant Maersk commented this morning about shipping markets normalising early in the second half of the year, we believe this will take time to filter through to end clients. As such, having recently updated our near-term estimates, we are comfortable with our position close to the bottom of DSV’s updated guidance range for 2022 of between DKK 18,000 million and DKK 20,000 million in EBIT. We reiterate our DKK 1,120 fair value estimate and believe the shares are moderately overvalued.

Following its acquisition of GIL in the third quarter of 2021, DSV is now the third-largest third-party logistics provider, or 3PL, globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its own operations.

Following its acquisition of GIL in the third quarter of 2021, DSV is now the third-largest third-party logistics provider, or 3PL, globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its own operations.

Following its acquisition of GIL in the third quarter of 2021, DSV is now the third-largest third-party logistics provider, or 3PL, globally, with around a 5% share in a highly fragmented market. Unlike peer Kuehne+Nagel, which has been in the industry for more than 125 years, DSV has accumulated its market share primarily through a series of strategic acquisitions over the past 30 years, which it has successfully integrated into its own operations.