Thursday, January 29, 2015
NOL: Deutsche maintaining its sell call on NOL but raising its TP to $0.91. The house notes that about 20% of NOL's operating costs are related to fuel. Even though industry conditions are challenging and there will be rate discounting, think it fair to assume that there will be some benefits of lower fuel retained by NOL. But after appreciating 30% over the last month to now stand at 1.1x 2015E P/B, think the earnings recovery that the street is forecasting is already in the price. Hence, do not recommend investors to chase the stock and maintaining its Sell recommendation. Expect supply growth in the industry to accelerate to 6.5% in 2015E, from 5.7% in 2014E, and this will put downward pressure on rates.