Period 1, 2011 operating statistics
Maintain OUTPERFORM and target price of S$2.65; no change to earnings. NOL released their Period 1 statistics yesterday for the six-week period from 1 January to 11 February. There was no sign of any pre-Chinese New Year rush at NOL, with volumes declining 5% mom, but the good news is that average rates stabilised. Nevertheless, spot CCFI/SCFI rates continued to decline sequentially to the week ended 4 March, suggesting that NOL’s average rates may resume their downtrend from period 2 onwards. Nevertheless, we maintain our OUTPERFORM call on the stock as we believe container shipping rates are in a multi-year uptrend, and a 2011 mid-cycle correction is in line with expectations. Our target price remains pegged to a P/BV multiple of 1.5x. Potential share price catalysts include freight rate recovery from between March and May and accelerating US GDP growth.
The details
Average daily volume was 4.6% higher yoy, due to higher volumes carried on the Asia-Europe and intra-Asia trade lanes. While daily volume was 4.9% lower sequentially, it was off a record-high period 12. The average rate for period 1 was 9.8% higher yoy, and was stable sequentially. This stopped four consecutive quarters of period-on-period rate declines. Average revenue was up 15% yoy as both rate and volume were higher against last year’s period 1, but down 4.6% sequentially on lower volume.
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