MARKET PULSE: NOL & Global Palm (22 Mar 2012)

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.38

Stock Name: Global Palm
Company Name: GLOBAL PALM RESOURCES HLGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.19

MARKET PULSE: NOL & Global Palm

22 Mar 2012

KEY IDEA Neptune Orient Lines: Transpacific provides boost The Shanghai (Export) Containerised Freight Index (SCFI) climbed 5% higher WoW in the week ended 16 Mar 2012. The increase in SCFI was driven by shipping liners' success in getting most of the previously announced US$300/FEU hike in transpacific shipping rates. However, bunker fuel prices have averaged 8% higher QoQ thus far in 2012. Furthermore, since new deliveries of vessels are expected to increase shipping capacity this year, shipping liners' collective discipline in managing the oversupply is key to the profitability of the entire container shipping industry. We pared Neptune Orient Lines' (NOL) FY12 net loss estimate to US$136m, from the previous US$281m, after the latest hike in transpacific shipping rates. But we maintain our fair value estimate of S$1.38/share and HOLDrating on NOL. (Eric Teo) MORE REPORTS Global Palm: Eyes higher cost in FY12 We spoke recently with management of Global Palm Resources (GPR) to get an update after ending FY11 on a pretty weak note. Going forward, GPR expects to increase new plantings to 1.0k ha, after planting 951 ha in FY11. It adds that it is on the lookout for M&A opportunities, where it has an ample net cash balance of IDR215.8b as of end FY11. But higher cost of production could crimp margins, even though CPO prices have generally remained fairly resilient thus far this year. As such, we have adjusted our margin assumptions accordingly, lowering our FY12 revenue estimate by 3.8% and earnings by 9.9%. In line with the revision, our fair value eases from S$0.195 to S$0.19, still based on 10x FY12F EPS. But as the stock is currently trading at just 0.7x its FY11 NTA, we believe that further downside is likely limited. As such, we maintain our HOLD rating. (Carey Wong)

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