NOL

NOL: June operating data weaker than expected.
Volume slowed to +5% growth yoy, from the ytd avg of +8% growth. The higher volumes were boosted by Intra-Asia trades, which helped offset lower volumes into the US in June, demonstrating the impact of the soft patch in the US economy. Volume growth has been on a decline from 12% in Feb-Mar, 9% in Apr, and 7% in May.

Avg revenue per FEU dropped 13% yoy to US$2513, reflecting continued rate pressures in the Asia-Europe and Transpacific routes.

The difficult trading environment was echoed by peer OOIL (316 HK) in their 2Q trading update last wk.

The silver lining is that NOL announced last wk that it would be putting through a $400/FEU peak season surcharge on cargo from Asia and Middle East to the US starting 1 Aug. This is 2 wks earlier than a no. of competitors, so it remains to be seen if it will be implemented.

Street expects NOL to report a net loss (wider than 1Q’s US$10m loss) when it reports 2Q results on 12 Aug.

Deutsche keeps at Sell with TP $1.34, says not surprised if the industry ends the yr in a loss, and given book value erosion, current P/B valuations at 1.3x are not attractive enough to warrant an upgrade.

Macquarie is Neutral with TP $2.25.