Monday, October 29, 2012


NOL: 3Q12 results saw quarterly pickup, but below Street expectations. NOL returned to profit of US$50m in 3Q, vs a net loss of US$118m in 2Q and a net loss of US$254m in 1Q. However the 9M12 net loss of US$321m suggests that NOL is still far from meeting consensus FY12 net loss forecast of US$87m, considering that 4Q is traditionally slower than the peak 3Q period. In 3Q, liner volumes were up only 1.1% yoy, while avg rev/ TEU was up 2.6% yoy. On a qoq basis, volumes were down 1.8%, due mainly to a decline in intra Asia, and avg rev/ TEU was flat, as the rise in Transpacific rates was offset by declines in Asia Europe and intra Asia routes. Mgt says they have achieved US$360m of cost savings ytd 2012 and are on track for their US$500m full target. Nevertheless NOL expects to post a full year loss, thinks that the macroeconomic outlook remains weak and the container shipping industry continues to face overcapacity and high fuel prices. Separately, NOL entered into a sale and leaseback agreement with Fragrance. NOL will sell its Spore HQ building for $380m, with completion of the divestment expected to be end Feb ’13, and NOL will lease back the building until Jun ’14. The net book value of the property is US$108m and the expected profit on sale is US$196m, which translates to 7.5% of NOL’s FY12e book value. Street mostly bearish. CIMB keeps at Underperform, cuts TP to $1.12 from $1.30, on continuing core losses into 2013. Nomura keeps at Reduce with TP $1.00. HSBC keeps at Underweight with TP $0.90, views upcoming rate hikes as unlikely to sustain given weak outlook from industry players. Deutsche however maintains at Buy with TP $1.45, says it is encouraged by the container shipping industry’s recent moves to reduce capacity, which could lead to rates stabilization.

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