NOL

NOL: Trouble woes continue as grp reported very poor set of results which was way below analyst estimates. Rev at US$2.4b, -3% yoy and flat qoq, while net profit at –US$254m vs –US$10m yoy and –US$320 qoq. Grp note that high fuel costs and low freight rates in container shipping affected 1Q12 performance. In Shipping, per FEU (forty-foot equivalent unit) -7% yoy, due mostly to lower rates, while Bunker fuel price increased 31% to US$684/mt in 1Q12. APL reduced fuel consumption by 75,000 mt even though overall cargo volume increased 4% in 1Q12. Grp add that rates have been moving up since Mar, but not yet enough to offset the high cost of fuel. In Logistics segment, reported revof US$394m, +7% yoy, as contract logistics rev increased 15% due mostly to strong demand for rail and land-based services from automotive customers. APL Logistics’ Core EBIT declined 38% due to higher operating and technology costs related to growth initiatives. Going forward, grp note that recent general rate increases have resulted in improved freight rates since Mar. However, the global economic outlook remains uncertain and the container shipping industry continues to face high fuel costs and overcapacity. If conditions for rates and fuel costs do not improve, the Group's financial performance will remain weak. Grp has target cost savings plans for abt US$500m this yr. At current price, grp trades at 0.9x P/B, while net gearing stands at a high 95.3%, which could suggest grp could tap the mkts in the yr for more fund raising. Ratings as follow: Citi maintains Sell with $1.05 TP JP Morgan upgrades to O/w from neutral with $1.35 TP Deutsche maintains Buy with $1.69 TP UOB Kay Hian maintains Sell with $1.06 TP