Friday, August 10, 2012
NOL
NOL: 2Q12 results. Headline loss, but recurring earnings largely in line.
Net loss was US$118m, which included US$112m exceptional for organization restructuring and sale of obsolete vessels. Stripping out exceptionals, 2Q12 core net loss was US$7m, compared with 1Q12 core net loss of US$246m, a marked improvement.
More importantly, at the operating level, 2Q saw a return to the black (US$18m) due to the container business. Container segment booked a 2Q operating profit of US$7m driven by higher avg freight rates (8% qoq) and lower costs (unit costs declined 3% qoq), although volumes declined 9% qoq.
Amongst the rotues, Asia Europe (AE) and Intra Asia revenue increased 6% and 10% respectively, with both rates rebounding 22% and 20% sequentially, respectively. Transpacific revenue declined sequentially but remains the main revenue generating route (46% of 2Q container revenue).
Mgt stressed the return to profitability was due to better cost control and fuel efficiency.
Street has mixed rating views.
JPM keeps at Overweight with TP $1.35. Says 2Q12 results strong, evidenced by turnaround in the liner business. Sees NOL as a restructuring play, which will position the co well against the competition long term.
Nomura maintains Reduce rating with TP $1.20, believes 4Q12 may disappoint as rates could decline after peaking in 3Q.
HSBC also keeps at Underweight with TP $0.90, implying 0.74x FY12e P/B with 4% ROE. Says outlook uncertain, expects rates unlikely to stick in the coming months as vessels continue to deploy in key routes as demand falters.
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