Container shipping / NOL

Container shipping / NOL: Deutsche expects the sector to dip into the red in 2011, as 1H losses were worse than expected and the current peak season appears lackluster. Remains cautious and expects the sector to post another downleg in the next 1-2 quarters once peak season ends. Notes that despite recent earnings downgrades, the Street still appears too bullish; its own 2011/12E earnings are 60%/90% below consensus. Notes, the sector is trading at 0.8x fwd P/B, still expensive as history suggests the P/B could trade down to 0.5x if the sector dips into red. But turns Neutralon a 12-month view, as further drops in rates in the coming quarters to force carriers to be disciplined, thus helping lift rates back up again. Upgrades NOL to Hold from sell with TP $1.04.

Goldman cuts TP to $1.30 from $1.75, but keeps Buy rating mainly on valuation at 0.7x P/B. Notes that NOL’s earnings recovery may be delayed due to a weaker outlook for containership volumes in the US and Europe; believes this will reduce the seasonal uplift in rates that it was initially expecting. Assumes losses of US$270m for 2011E vs a net profit of US$59m previously, and that losses will persist until 2Q12E, as opposed to the previous view that earnings would recover in 3Q11E.