Citigroup downgrades NOL to Sell from Buy on concerns that earnings may head downhill after the 3Q peak season on weaker US retail sales and accelerating newbuild deliveries over next 2 years. While NOL looks set to become profitable this year on strong volume surge and rising freight rates, expect operating environment to turn challenging by 4Q10 and FY11-12E outlook may be unexciting, Valuations do not justify premium, at 1.4x FY11E PB set against a paltry 2% ROE.
Target price of $1.70 (from $2.00) based on 20-year historical mean PB of 1.1x.
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