NOL

NOL: warns that shipping firms are operating in an unsustainable economic environment with prospects unlikely to improve much in 2012 due to high fuel prices, low freight rates and slowing demand.
Highlights the container freight mkt has been struggling with an overcapacity of ships and may be forced to consolidate further.
APL, its container shipping unit, has 32 container vessels due to be delivered by 2013 and commented "we have a huge challenge ahead of us in terms of deploying those assets in a difficult mkt".

Separately, NOL reports operating data for Period 11 (22 Oct – 18 Nov).
Avg revenue per FEU fell to US$2401/FEU, -14% yoy due to lower rates in major trade lanes, was flat mom.
Volume at 224,200 FEU +2% yoy, but weekly volumes -7% from Period 10, reflecting slowing volumes on both the Intra-Asia and long haul Asia-Europe / US trades.

Morgan Stanley believes that the success of proposed rate hikes is contingent on continual capacity rationalization. Believes that despite weak spot freight rates, news flow is incrementally turning more positive, marking a gradual return to rational pricing and an eventual freight rate recovery from unsustainable cash loss levels. Near-term negative catalysts are: sharp 4Q11 losses and potential need to raise capital, but recovering freight rates and a stronger balance sheet are medium-term positives.

Credit Suisse prefers exposure to OOIL with stronger track record at lower forward P/B of 0.7x. Notes CSCL is the high beta play and also on lower P/B of 0.6x, while NOL is more exposed to the Transpacific trade which could potentially see a rate hike, and its forward P/B of 0.8x is 1 SD below its historical average.