Company Name: NEPTUNE ORIENT LINES LIMITED
| Research House: UOB KayHian | Price Call: BUY | Target Price: 1.46 |
Several brokers raised their target prices on Neptune Orient Lines after the container shipping firm swung to a net profit for its third quarter, breaking six consecutive quarters of losses.
NOL posted a net profit of US$50 million ($61 million) for the three months ended September, compared to a net loss of US$91 million a year earlier, helped by cost cuts as well as improvements in its liner and logistics businesses.
NOL shares were down 0.9% at $1.16 on Monday. The stock has risen 3% so far this year, underperforming the 15% gain in the broader Straits Times Index.
“We take NOL’s first net profit in seven quarters as a firm sign of a turnaround in the sector. 2014 will provide the plump rewards for shipping lines able to endure a potentially challenging 2013 supply situation,” Maybank Kim Eng said.
The broker raised its target price to $1.46 from $1.35 and maintained its ‘buy’ rating.
UOB Kay Hian said carriers are likely to push through Asia-Europe rate increase of US$500 per twenty-foot equivalent unit from Nov. 1. Carriers’ capacity discipline remains intact, which will help sustain the rate hike, UOB said.
NOL has agreed to sell its office building to Fragrance Group for $380 million and will book a one-off gain of $246 million, the broker noted. UOB upgraded NOL to ‘buy’ from ‘hold’ and raised its target to $1.54 from $1.26.
DBS Vickers increased its target to $1.26 from $1.23 andmaintained its ‘hold’ rating. It warned that NOL’s profitability may not be sustained in the following quarters, citing high fuel prices and disappointing trade data from Europe.
DBS expects NOL to report a core net loss of US$217 million in 2012 fiscal year, while lowering its 2013 net profit estimate by 10% to US$178 million.
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