NOL

NOL: 2Q14 net loss widened 55% to US$53.7m while revenue inched lower 1% to US$2.05b, mainly due to a 2% decrease in Liner revenue to US$1.7b on the back of a 6% volume decrease. Finance expenses ballooned to US$33m vs. last year’s US$0.6m finance income, as there was a gain from financial hedging instruments last year. Nevertheless, the group continued to make gains at the operating level, bringing 2Q14 core operating loss down to US$15m, or an improvement of 52%. As a result of the losses, net debt/ equity at the end of 1H increased to 216%, from 182% at end of 2013. In 2Q, NOL had an operating cash outflow of US$24.2m and a FCF drain of US$ 93.9m (i.e. negative FCF). Deutsche is worrying about the financial health of the company as net debt to equity escalating to 253% at end of FY14 and 301% at end of FY15. Although volumes may move up over the next few months during peak season, peaks may fail to perform accordingly. Persistent oversupply of shipping capacity will limit the pace of liner freight recovery, and competitive conditions should remain. NOL is trading ~1x P/B. Latest broker ratings: Deutsche maintains Sell with TP of $0.69 NOL maintains Sell with lower TP of $0.90 (from $0.92)