Company Name: NEPTUNE ORIENT LINES LIMITED
| Research House: Nomura | Price Call: BUY | Target Price: 1.50 |
Nomura upgrades NOL to Buy from Reduce. “Signs of revival in US housing and our forecasts for stronger economic growth in the US than in Europe bode well for NOL, which has the highest exposure to trans-Pacific routes (based on volume) among the pure container lines under coverage.”
The house forecasts US and EU GDP to bottom in 1Q13, with container-sector demand and earnings to rebound from 2Q13 onward. It expects Asia-Europe freight rates will likely remain profitable while improving U.S. housing data could be positive for trans-Pacific routes, possibly leading to higher annual contract rates. It expects the company’s internal restructuring and US$500 million ($610 million) cost-saving initiative to lower unit costs, returning NOL to profit in 2013 after two years of losses, compared with its previous 2013 forecast for a US$68 million loss.
It raises its target to $1.50 from $1.00 based on a mid-cycle P/B of 1.1x for the container business from 0.7x previously; it keeps the logistics business pegged to 3.3x P/B. The stock is up 1.4% at $1.11.
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