Orsted’s impairment shock; UBS efficiency hopes Orsted’s impairment shock; UBS efficiency hopes Orsted’s impairment shock; UBS efficiency hopes

Orsted’s impairment shock; UBS efficiency hopes

Equities 5 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  Orsted shares are down 22% as the utility and offshore wind project developer announced USD 2.3bn impairment related to higher construction costs of offshore wind farms, supplier delays, lack of progress in additional US tax credits, and higher interest rates. UBS reports FY23 Q2 results tomorrow morning which will be its first combined result since the forced takeover of Credit Suisse back in March. While some analysts are skeptical of the new UBS, investors seem to be bullish on the outlook and expect UBS to execute on cost savings and gaining a competitive advantage in global wealth management.

Key points in this equity note:

  • Orsted has announced $2.3bn in impairments over higher offshore wind project costs and supply delays, lack of progress in additional US tax credit, and finally higher interest rates. Shares are down 22% extending the drawdown since early 2021 to 68%.

  • Orsted has complex operating model and investors have liked come to the same conclusion with the risk factors to the business not understood well.

  • UBS reports FY23 Q2 results tomorrow morning which will be the first results of the combined business since the forced takeover of Credit Suisse back in March. Investors are so excited about the outlook with the stock up 33% this year.

Orsted shares plunge 22% on $2.3bn impairment

Orsted, once the wonder child of the green transformation Europe, was down 60% as last Friday from its all-time high back in early 2021 when the technology bubble reached its zenit. As the pain had not been enough for shareholders the Danish utility and offshore wind project developer announced this morning impairments of $2.3bn driven by three factors, 1) supplier delays on US offshore wind projects, 2) high interest rates lowering the value of offshore wind farms, and 3) additional US tax credits to offset higher building costs that are not progressing as planned. Shares are down 22% on the news extending the drawdown to a horrible 68%.

While many of these problems were known the shareholder sensitivity to these factors was less known by investors and this comes back to Orsted’s complexity and lack of proper disclosures to key risk factors. We highlighted Orsted’s operating complexity earlier this month arguing that its valuation was too high given the various headwinds for the green transformation and especially offshore wind projects.

Several analysts have already been out saying that these impairments do not impact EBITDA. This is true, but equity valuation is done on EBITA and higher project costs and generally inflation will put pressure on EBITA over time. Orsted’s EBITA margin 1t 14.9% in FY22 was the lowest in more than five years. Investors are most likely worried about that these impairments reflect potentially lower long-term margins in the business.

Orsted share price | Source: Saxo

Could UBS’ forced acquisition of Credit Suisse become jackpot of the decade?

UBS reports its first quarterly result of the combined group after its forced acquisition of Swiss competitor Credit Suisse back in March, which was completed on 12 June. The new CEO Sergio Ermotti is on a mission to quickly integrate Credit Suisse into the group and harvest the synergies expected from the merger which will include selling certain Credit Suisse assets and close non-core businesses.

Analysts are expected net revenue of $8.5bn down 9% from a year ago and adjusted net income of $1.32bn down 29% from a year ago. Investors are betting that Ermotti will deliver more details on the vision for the new Swiss bank and that targets for profitability will beat those of analysts. The estimated FY25 net income is only $8.4bn, which is more or less unchanged from the FY21 results, and seems too conservative given the reputation of Ermotti, but also the cost cutting potential there exists in the new combined business. Investors seem to agree wanting to be part of what could become a powerhouse in global wealth management, which is a high margin and predictable business, sending UBS shares up by 33% this year and 15% alone since 10 August when UBS ended the Swiss government loss protection seen by investors as a sign of strength and the improving outlook.

UBS is currently valued around 0.9x tangible net asset value expected for FY23, which is close the long-term average ending in December 2022. With higher interest rates, strategic benefits in wealth management post the merger, and potential cost savings, we believe investors may be willing to pay a premium over time on tangible book value, but it all comes down to cost execution by Ermotti and the management team. If UBS executes this merger well, then it may turn out to be jackpot of decade for UBS shareholders. First step in that long journey is tomorrow’s FY23 Q2 results.

UBS share price | Source: Saxo

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.