NOL

NOL: Results below street estimates. Reported net loss of US$419m for FY12, vs expectations of US$223m loss. For 4Q12, Group reported loss of US$98m, vs expectations of US$8m loss. Mgmt maintained that Group's underperformance was attributed to the Transpacific route relative to peers as having too much volume on contract. DB reported however, that its Transpacific route (48% of Group's total) was flat in the year when its peers saw 3% growth on the route where spot rates rose by >50%. Asia-EU attributed 20% Group's revenues, with volume growth of 1% and rates declined 1% y/y. Gearing increased to 136% from 119% a quarter ago. Group maintained the financing for its new vessel deliveries for 2013 have been arranged, and the sale of NOL building for $380m will be completed by March 2013. Unit operating costs continued to improve (-2%) as bunker price and consumption fell, but reductions fell short on street projections. Management commented that they are seeing some signs of recovery in the global economy. Even though the container shipping industry continues to face a severe oversupply situation, NOL expects a better performance in 2013. The company is optimistic about its Transpacific trade this year. They are seeing positive economic indicators and expect volume growth of around 5%. DB maintains BUY with TP of $1.36, based on 1.2x P/B; House thinks industry will maintain discipline, as liners work towards raising rates to stop the bleeding. Spot rates will be the closest indicator to watch. CS maintains UNDERPERFORM rating with TP of $0.95; OCBC maintains BUY with TP of $1.38; UOB maintains BUY at tp of $1.54; House expect more EPS upgrades for 2013 coming from 1) sale of NOL building, 2) stronger-than-expected rate increase on the AE trade lane, 3) potential 15-20% improvement in TP contact rates