CLSA starts NOL at underperform; target $1.70

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: CLSA

Price Call: SELL

Target Price: 1.70

CLSA has initiated coverage of Singapore container shipping firm Neptune Orient Lines (NOL) (NEPS.SI) with an underperform rating and a target price of $1.70.

NOL has spent time restructuring its low-return logistics business and is now in a position to drive greater growth and expand margins, CLSA said in a statement.

The brokerage said it expects NOL’s earnings to grow at an average 11% a year from now to 2014.

CLSA said that despite the current slump in earnings from weaker European container rates, NOL could lift its return on equity to 12% as its newer and more efficient vessels and greater scale will help to expand its margins. 

However, CLSA noted that while NOL’s earnings could recover, its current valuations are neither expensive nor compelling for investors and returns may also be limited.

At 11:09 a.m., NOL shares were down 1% at $1.47 and have fallen about 34% since the start of the year.