NOL

NOL: Barclays kept NOL at Overweight, with TP raised 15% to $1.32, following the announcement of the disposal of the logistics segment for US$1.2bn (vs its earlier expectation of US$0.75-0.9b, which had implied a potential mark-up of
US$0.12-0.17/share).

House revised its forecasts now take into account the one-off profit of US$0.9bn from the disposal, the removal of the profit contribution from the logistics segment beginning 2H15 and lower interest expense, which boosted 2015E EPS to US$0.37 (from US$0.07 previously).

House sees value in NOL’s stock, which trade at 0.7x 2015E P/B, below its recent three-year average forward P/B of 1.2x.

Key risks include:
1) NOL’s operating losses and fixed rate operating leases could cause cash flow tightness and raise the possibility of external financing in a sustained economic recession.
2) NOL has total borrowings of US$5.0bn after debt repayment. House estimates 90% of its US$0.7bn in short-term borrowings is USD denominated which exposes it to interest rate risk.