NOL

NOL: 2Q results weak as expected.
Net loss of US$57m widened from 1Q loss of US$10m, due to weak Asia-Europe freight rates, low utilization on Transpacific (81% from 84% in 1Q11 and 90% in 2Q10), and high bunker costs.

Mgt warns of weakened trade demand and poor freight rates; says if conditions do not improve, they expect to post a full year loss. This is in line with the situation experienced by the rest of the industry.

3Q may offer a reprieve from falling freight rates as it is the traditional peak season. NOL also expects to implement the critical Peak Season Surcharge on Transpacific West Coast routes from 15 Aug, having implemented them on East Coast routes since 1 Aug. But thereafter, rates are expected to revert to their downward trend in 4Q.

Stock trades at 0.8x P/B, vs trough valuations of <0.5x P/B.

Citi keeps Sell with TP $1.20, due to lack of catalysts. Says risk averse investors may look beyond traditional seasonality and focus on economic worries, note the recent sharp equity mkt correction points to weaker demand in quarters ahead.
Deutsche keeps Sell with TP $1.14, says not time to upgrade yet bcs continued weak freight rates and an uncertain economic growth picture in the US will likely weight on the stock.
JPM rates at Neutral, downgrades TP to $1.75 from $2.00.