NOL

NOL's 2Q15 net shipping loss narrowed to US$10.9m from US$75.9m in 2Q14: -US$75.9m. This excludes disposal gain of US$886.6m from the US$1.2b sale of APL Logistics in May '15.

Liner revenue tanked 22.2% y/y to US$1.3b (2Q14: US$1.7b) on the back of lower shipment volumes of 582,000 FEUs (-12.1%), stemming from planned capacity cuts and void sailings, and weaker average freight rates averaging US$1,933/FEU (-16.7%) across all trade lanes, except Transatlantic route:
- Asia-Europe US$1,671 (-31.3%)
- Intra-Asia US$1,178 (-17.6%)
- Latin America US$2,744 (-11.2%)
- Transpacific US$3,075 (-8.5%)
- Transatlantic US$2,884 (+4.1%)

However, cost savings (network optimisation, charter expiries, cargo handling) of US$100m as well as lower bunker costs helped turnaround NOL’s core liner EBIT to US$20m from a loss of US$28m.

Headhaul utilisation rate dipped 2ppt q/q to 92% despite industry overcapacity but with Transatlantic route particularly hard hit, down 13ppt to 79%.

NOL booked a one-off gain of US$886.6m on disposal of APL Logistics to Kintetsu World Express. This strengthened its financial position and enabled the group to pare its net gearing to a manageable 1.03x from 2.21x as at end Mar.

Operating cashflow turned around to US$105.1m from negative US$24.2m, helped by the improved performance.

Management highlighted that outlook for the shipping industry remains bleak due to persistent overcapacity as well as weak trade growth. It intends to continue its cost and capacity rationalisation exercise in a bid to improve yields and return its liner business to sustainable profitability.

NOL is currently trading at 0.67x P/B against its Asian peers at 1x.

Latest broker ratings:
CIMB maintains Hold, cuts TP to $1.02 from $1.05
Deutsche maintains Hold with TP of $1.10
HSBC maintains Reduce, raises TP to $0.80 from $0.70