NOL

NOL: DBSV downgrade NOL to Hold from Buy and cuts TP to $2.15 from $2.50. Note that rebound continues, but not as smoothly. While vol continued to surprise in 4Q10, largely driven by Intra-Asia trade growth, freight rates have continued to weaken in recent months as supply has held steady despite the weak season. Operating costs per FEU were down 4% q-o-q in 4Q10 as a result of a change in trade mix and better cost controls, but the higher oil price environment puts that at risk…..

Add that Oil prices have now risen 15% since the start of the Libyan crisis and will affect sentiment for the liners, as they may not be able to fully pass on the higher fuel costs in short term, given the seasonally weak period now. Conclude that sector outlook is uncertain in the near term with high number of new containership deliveries expected in 1H-2011….

Downgrade to HOLD, but note that re-rating possible. Cut FY11 earnings forecast by about 8% in view of slightly weaker freight rates and higher fuel costs. With limited upside, house downgrade the stock to HOLD. Potential re-rating catalysts include faster than expected recovery in the freight rates, favourable outcome of annual Transpacific renegotiations in May and a more benign oil price environment.