Neptune Orient Lines (NOL) finally reported a profitable 3Q12 after six consecutive quarterly losses. Its revenue grew 4.0% YoY to US$2.3b (vs. +6% forecast) on higher volumes while its core EBIT improved to US$74m – a much better showing versus–US$72m in 3Q11 and marginal gains of US$16m in the previous quarter. The better performance came largely on the back of significant cost savings from its Efficiency Leadership Programme (ELP) as freight rates remained lacklustre despite the peak season impact. With this improved result, we narrow our net loss projections for FY12 as we anticipate 4Q12 rates to hold up well, capacity management efforts by the industry to continue, and bunker fuel rates to remain capped at current levels. Maintain BUY with an unchanged fair value estimate of S$1.38.
Back in black
Neptune Orient Lines (NOL) finally reported a profitable 3Q12 after six consecutive quarterly losses. Its revenue grew 4.0% YoY to US$2.3b (vs. +6% forecast) on higher volumes while its core EBIT improved to US$74m – a much better showing versus–US$72m in 3Q11 and marginal gains of US$16m in the previous quarter. The better performance came largely on the back of significant cost savings from its Efficiency Leadership Programme (ELP) as freight rates remained lacklustre despite the peak season impact. NOL announced a US$50m PATMI, against a loss of US$91.1m the same period a year ago.
Cost savings at 72% FY12 target
On a YTD basis, NOL's ELP has saved the Group US$360m, well on its way to achieve its US$500m target for the year. Although the bulk of the programme (~44%) is targeted at bunker-related costs, it is - in itself - a capacity issue as well. For instance, by utilizing fewer but larger and more fuel-efficient vessels, NOL reduced fuel consumption cost by 8% even with a 3% increase in volume for 9M12.
Sale of HQ to Fragrance
In a separate announcement, NOL agreed to sell its building at Alexandra Road to the Fragrance Group for S$380m, slightly below estimates from initial media reports of ~S$400m. The sale is expected to be completed by Feb 2013, and NOL will lease back the property till end-Jun 2014. Including transaction fees, the gains from this sale is approximately US$196m.
Still net loss for FY12 but signs promising; maintain BUY
As demand remains weak, managing container shipping capacity is still the main driver for maintaining profitability, and collective efforts thus far - e.g. withdrawal of routes - are paying off slowly. With 29 chartered vessels expiring between 4Q12 and 2014, NOL is in an optimal position to manage capacity more effectively. As for rates, although NOL is now in the seasonally weaker 4Q12, recent data from the Shanghai Containerized Freight Index has been encouraging with only slight dips in freight rates across the main trade routes (with the exception of Asia-Europe). Maintain BUY with an unchanged fair value estimate of S$1.38.
Neptune Orient Lines (NOL) finally reported a profitable 3Q12 after six consecutive quarterly losses. Its revenue grew 4.0% YoY to US$2.3b (vs. +6% forecast) on higher volumes while its core EBIT improved to US$74m – a much better showing versus–US$72m in 3Q11 and marginal gains of US$16m in the previous quarter. The better performance came largely on the back of significant cost savings from its Efficiency Leadership Programme (ELP) as freight rates remained lacklustre despite the peak season impact. NOL announced a US$50m PATMI, against a loss of US$91.1m the same period a year ago.
Cost savings at 72% FY12 target
On a YTD basis, NOL's ELP has saved the Group US$360m, well on its way to achieve its US$500m target for the year. Although the bulk of the programme (~44%) is targeted at bunker-related costs, it is - in itself - a capacity issue as well. For instance, by utilizing fewer but larger and more fuel-efficient vessels, NOL reduced fuel consumption cost by 8% even with a 3% increase in volume for 9M12.
Sale of HQ to Fragrance
In a separate announcement, NOL agreed to sell its building at Alexandra Road to the Fragrance Group for S$380m, slightly below estimates from initial media reports of ~S$400m. The sale is expected to be completed by Feb 2013, and NOL will lease back the property till end-Jun 2014. Including transaction fees, the gains from this sale is approximately US$196m.
Still net loss for FY12 but signs promising; maintain BUY
As demand remains weak, managing container shipping capacity is still the main driver for maintaining profitability, and collective efforts thus far - e.g. withdrawal of routes - are paying off slowly. With 29 chartered vessels expiring between 4Q12 and 2014, NOL is in an optimal position to manage capacity more effectively. As for rates, although NOL is now in the seasonally weaker 4Q12, recent data from the Shanghai Containerized Freight Index has been encouraging with only slight dips in freight rates across the main trade routes (with the exception of Asia-Europe). Maintain BUY with an unchanged fair value estimate of S$1.38.
No comments:
Post a Comment