NOL

NOL: Citi upgrades to Buy from Sell and raises TP to $1.35 TP from $1.05. (Note that Citi has been very bearish on this counter for a while) House note that NOL has made good progress on an improved strategy under its new CEO. Impressive initiatives are being executed to cut US$500mn costs in FY12E (vs. US$9bn cost base), enhance yield, and improve service offering. These best practices are a good start for NOL to narrow its financial under-performance against industry profit leaders such as OOIL. NOL’s 2H12-2013 earnings may be resilient, as NOL has >40% rev exposure to the relatively stable Transpacific trade. NOL is also taking delivery of many cheap new ships ordered near the bottom of the shipbuilding cycle that have high fuel efficiency, and which may replace high-cost chartered-in vessels. House raise estimates significantly, to above Street’s, on higher rates assumptions. Add that valuations appear mispriced and NOL share price has under-performed its peers YTD, declining 6% vs. industry +2%. The market may have over-looked progress in NOL’s improved strategy, due to lack of clear data points. NOL is trading at 0.7x FY12-13E P/B, or -1 SD. to the mean, a wide disparity vs. its FY12-13E ROE. Separately UOB Kay Hian upgrades NOL to Hold frm Sell and raises TP to $1.12 fron $1.05