NOL

NOL: OCBC maintains Buy with $1.38 TP. House cautiously optimistic. Note that the G6 Alliance (of which NOL belongs to) recently pulled the Loop 3 service on the Asia-Europe (AE) route after the carriers cited ‘the forecast lack of improvements’ in the trade lane. This latest development reiterates the softness of the AE route although the more important Transpacific route is still exhibiting encouraging signs with volume picking up and incremental rate increases holding up well. Whether the peak season will provide a much needed boost for carriers remains to be seen but we adjusted our forecasts slightly to account for the recovery in bunker fuel price and potential dip in freight rates in 4Q. The industry remains well aware that managing container shipping capacity is essential for profitability and collective efforts to withdraw service/capacity have been encouraging. Coupled with NOL’s Efficiency Leadership Programme (ELP) showing significant cost savings.