NOL facing third consecutive year of losses

2Q results will be especially weak.

The forecast came from Maybank Kim Eng who expects the global transport and logistics group to suffer its third straight loss year in FY13, predicting $182m in losses for the full FY13 with $160m losses to come in during the second quarter alone.

Here's more from Maybank:

Assume coverage with HOLD, TP: SGD1.25. Following a change of analyst, we assume coverage of NOL with a TP of SGD1.25 based on 1.1X FY13-14E BVPS (long-term average: 1.2X). Fundamentally, we believe that the container shipping industry is near its cyclical trough and expect better times ahead as the supply overhang improves over the next few years. However, we remain cautious in our recommendation as the prospect of a third consecutive year of losses (on our estimates) will likely weigh on sentiment towards the stock. Furthermore, we believe consensus expectations of a profitable FY13 will be missed.

Consensus remains too bullish. After adjusting for the one-off gain on the disposal of a building, we forecast a third consecutive year of losses in FY13, to the tune of USD182m. We believe that consensus numbers may not have fully reflected the weak rate environment this year and expect earnings downgrades to trickle through. We expect losses to widen sequentially in 2Q13E, to approximately USD160m.

Container shipping industry currently at the trough, in our view. Freight rates continue to be under pressure as industry oversupply is exacerbated by ongoing vessel deliveries. On the plus side however, a high rate of vessel demolitions recently has led BIMCO, a shipping association, to revise its full-year fleet growth estimates to +6.1% from +7.4%.

Better times ahead, but still too early to get in. We expect industry oversupply to ease from FY14E onwards as vessel deliveries slow. Compared to a pre-crisis high of 58%, vessels on order have moderated to only 19% of existing fleet in the industry. As vessel oversupply is the primary cause of pain in the industry, a moderation in future supply growth would be the best gauge of better industry prospects, in our view. With the ongoing delivery of new vessels, we expect NOL to return the majority of charters expiring over the next two years. This would bring its net fleet growth to 2% and 5% YoY in FY13E and FY14E respectively, and lower the percentage of fleet chartered to 31% (Dec 2012: 59% chartered).

Reaching the people who run Asia's businesses is harder than it used to be.

Inboxes are crowded. Attention is short. The executives you most want to reach — the founders, CFOs, and operators who actually move budgets — are the hardest to find through the usual channels. If you're building a company, a category, or a reputation, you already know this.

We've spent twenty years building the room they read. Singapore Business Review is where senior decision makers in Singapore and across Southeast Asia come for business coverage they can't get elsewhere — in print, online, and in person at the summits and roundtables we host across seven markets.

If you have something these readers should know about — a point of view worth publishing, a product worth their attention, an event worth their time — we'd like to hear what you're trying to do.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia