NOL
NEPTUNE ORIENT LINES LIMITED
N03.SI
Neptune Orient Lines: Stuck in the red
- Neptune Orient Lines Ltd’s (NOL) 1Q16 core earnings (liner business) remained in the red as net loss widened 190.5% YoY to US$105.1m.
- 1Q16 liner revenue fell 28.0% YoY to US$1.14b due to falling freight rates and weak container trade demand.
- In-line with lower revenue, 1Q16 cost of sales declined 21.6% to US$1.13b mainly from its cost savings programme of US$60m (network optimisation and charter expiries) and a US$89m decline in bunker price. However, these were not enough to offset the impact from decline in volume (US$50m) and plunge in freight rates (US$312m), resulting in a 1Q16 core liner EBIT loss of US$84m compared to liner EBIT of US$13m in 1Q15.
- In view of weak freight rates outlook on overcapacity reasons, we continue to keep our forecast for a loss-making FY16 unchanged. Therefore, with the same FV of S$1.00, we maintain our recommendation to ACCEPT THE OFFER when pre-conditions are met (U.S. and China approvals).
- At the current share price of S$1.295 (6-May), we still think the risk-reward makes sense for investors to sell part of their holdings in the open market.
Eugene Chua
OCBC Securities
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http://www.ocbcresearch.com/
2016-05-09
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