Neptune Orient Lines (NOL) last Friday announced it has decided to postpone its proposed issue of perpetual capital securities to a time when market conditions are more favourable. Separately, the SCFI climbed 10% WoW in the week ended 30 Mar 2012, with Shanghai to Europe and Shanghai to Mediterranean freight rates gaining 21% and 20% WoW respectively. It is remarkable to see another significant gain in Asia-Europe freight rates shortly after shipping liners succeeded in doubling rates on 1 Mar 2012. The recent gains in freight rates show shipping liners’ collective discipline in idling capacity in the Asia-Europe trade lane. We maintain our fair value estimate of S$1.38/share and HOLD rating on NOL, but acknowledge that NOL could possibly see strong buying interest in the near term after the latest rate hike.
Perpetual capital securities issue postponed
Neptune Orient Lines (NOL) announced it has decided to postpone its proposed issue of perpetual capital securities to a time when market conditions are more favourable. Presumably, NOL received lukewarm demand for the proposed issue from its meetings with investors, who remained pessimistic in the outlook for container shipping. On a more positive note, NOL has perhaps shown it has no pressing need to raise funds with the postponement of this issue.
Another hike in Asia-Europe freight rates
The Shanghai (Export) Containerised Freight Index (SCFI) climbed 10% WoW in the week ended 30 Mar 2012, ahead of shipping liners’ announced general rate increase (GRI) of US$400/TEU in Asia-Europe freight rates on 1 Apr 2012. According to the SCFI, Shanghai to Europe freight rates gained US$289/TEU, or 21% WoW, while Shanghai to Mediterranean rose US$273/TEU, or 20% WoW. While shipping liners only succeeded in getting ~70% of the announced GRI, it is remarkable to see another significant gain in Asia-Europe freight rates shortly after shipping liners succeeded in doubling rates on 1 Mar 2012. Also, the recent gains in freight rates are the result of shipping liners’ collective discipline in idling capacity in the Asia-Europe trade lane.
Concerns still abound
However, delivery of new vessels are still expected to increase shipping capacity this year, underlining the importance of shipping liners’ continued efforts to manage overcapacity concerns. Coupled with unrelenting bunker fuel prices that have averaged 8% higher QoQ in 1Q12, investors remain uncertain of the container shipping sector for the rest of the year.
Maintain HOLD
We maintain our fair value estimate of S$1.38/share and HOLD rating on NOL, based on our 12-month horizon, but acknowledge that NOL could possibly see strong buying interest in the near term after shipping liners’ latest round of GRI.
Neptune Orient Lines (NOL) announced it has decided to postpone its proposed issue of perpetual capital securities to a time when market conditions are more favourable. Presumably, NOL received lukewarm demand for the proposed issue from its meetings with investors, who remained pessimistic in the outlook for container shipping. On a more positive note, NOL has perhaps shown it has no pressing need to raise funds with the postponement of this issue.
Another hike in Asia-Europe freight rates
The Shanghai (Export) Containerised Freight Index (SCFI) climbed 10% WoW in the week ended 30 Mar 2012, ahead of shipping liners’ announced general rate increase (GRI) of US$400/TEU in Asia-Europe freight rates on 1 Apr 2012. According to the SCFI, Shanghai to Europe freight rates gained US$289/TEU, or 21% WoW, while Shanghai to Mediterranean rose US$273/TEU, or 20% WoW. While shipping liners only succeeded in getting ~70% of the announced GRI, it is remarkable to see another significant gain in Asia-Europe freight rates shortly after shipping liners succeeded in doubling rates on 1 Mar 2012. Also, the recent gains in freight rates are the result of shipping liners’ collective discipline in idling capacity in the Asia-Europe trade lane.
Concerns still abound
However, delivery of new vessels are still expected to increase shipping capacity this year, underlining the importance of shipping liners’ continued efforts to manage overcapacity concerns. Coupled with unrelenting bunker fuel prices that have averaged 8% higher QoQ in 1Q12, investors remain uncertain of the container shipping sector for the rest of the year.
Maintain HOLD
We maintain our fair value estimate of S$1.38/share and HOLD rating on NOL, based on our 12-month horizon, but acknowledge that NOL could possibly see strong buying interest in the near term after shipping liners’ latest round of GRI.
No comments:
Post a Comment