SG: Neptune Orient Lines - Tough going but better times ahead

Stock Name: NOL
Company Name: NEPTUNE ORIENT LINES LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.38

NEPTUNE ORIENT LINES 10 May 2012

TOUGH GOING BUT BETTER TIMES AHEAD - Net loss of US$254m in 1Q12 - But freight rates are now profitable - On track to reduce cost by US$500m Neptune Orient Lines (NOL) reported a net loss of US$254m in 1Q12. Logistic revenue grew 7% YoY to US$394m but was unable to offset the 4% fall in Liner revenue to US$2.0b. Group revenue slipped 3% YoY to US$2.4b. Liner revenue shrank despite a volume gain of 4% YoY because average revenue per 40-foot unit (FEU) came in at 7% lower. Management said NOL's Efficiency Leadership Programme is on track to achieve US$500m of cost savings in 2012. Freight rates have so far in 2Q12 averaged 33% higher QoQ and current rates should see NOL return to profitability in 2Q12. And with NOL expected to turn profitable, we maintain our fair value estimate of S$1.38/share and BUY rating on NOL.