Monday, July 12, 2010

NOL

Citigroup downgrades NOL to Sell from Buy on concerns that earnings may head downhill after the 3Q peak season on weaker US retail sales and accelerating newbuild deliveries over next 2 years. While NOL looks set to become profitable this year on strong volume surge and rising freight rates, expect operating environment to turn challenging by 4Q10 and FY11-12E outlook may be unexciting, Valuations do not justify premium, at 1.4x FY11E PB set against a paltry 2% ROE.

Target price of $1.70 (from $2.00) based on 20-year historical mean PB of 1.1x.

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