Citigroup ups NOL to buy, targets $2.50

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED
Research House: Citigroup

Citigroup has upgraded Singapore’s Neptune Orient Lines (NOL)(NEPS.SI), the world’s seventh largest container shipping firm, to buy from hold with an increased price target of $2.50.

Citigroup’s previous target was $2.40.
Citigroup said that NOL’s net profit of US$177 million ($226.2 million) was far ahead of market expectations of US$118 million.

The broker is bullish about the shipping sector as high fuel prices will spur shipping lines to move their ships at slower speeds to save fuel, a process called slow-steaming.

“More slow-steaming in transpacific may help to absorb capacity spillover from Asia and Europe, capping near-term downside to freight rates,” Citigroup said.

The broker added that NOL’s logistics arm was an “under-recognised” part of the firm. Low U.S. inventory levels and strong demand in the logistics segment will boost NOL in this area.

At 12:05 p.m., NOL shares are up 2.8% at $2.19 on a volume of over 23.5 million shares.