JP Morgan, which has a Neutral rating, says the sequential softening of average revenue per FEU was not unexpected “given the end of the peak shipping season.”
Neptune Orient Lines (NEPS.SI) said on Monday its container shipping volumes for the seven weeks to Dec 31 rose 26% from a year ago, helped by higher traffic on the intra-Asia and Asia-Europe routes.
NOL, the world’s sixth largest container shipping firm, carried 394,500 forty-foot equivalent unit (FEU) during the seven-week period, up from 312,500 FEUs a year ago.
Volumes rose 8% over the same period last year on a normalised six-week period, the firm said.
The average revenue per FEU increased 21% year-on-year over the same period to US$2,647 ($3,396) per FEU, helped by improved freight rates on major trade lanes, in particular Tran-pacific and Asia-Europe.
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Volume is modest at 874 million shares worth $817 million, with decliners and gainers evenly matched in the broad market.
At 0251 GMT, NOL shares were down 2.1% at $2.33 on a volume of 2.6 million shares.
Credit Suisse keeps the Asia container shipping sector at Overweight, noting China outbound freight rate and utilisation on major trades rebounded last week after weeks of decline, with cargo volumes starting to recover ahead of the Lunar New Year holiday.
The house also notes leading indicators such as the US ISM and China PMI new export orders for December continued to expand on-month and it views as suggesting decent Asian exports in the next few months, while the latest US and European consumer sentiment and retail data also point toward an improving demand outlook.
Singapore stocks may open higher on Friday after Wall Street racked up a fourth straight week of gains overnight, but trading is expected to be sluggish as many traders are away on Christmas Eve.
The following companies may have unusual price changes in Singapore trading today. Stock symbols are in parentheses, and share prices are from the previous close. Singapore’s Straits Times Index dropped 0.2% to 3,137.78.
Phillip Securities downgrades Neptune Orient Lines (N03.SG) to Hold from Buy due to limited upside of 11.6% from current share price to fair value estimate of $2.41, which is raised from $2.36 due to higher estimates.
The house is now more optimistic on the outlook of container shipping industry, while “NOL has also ordered new container vessels, which shows it is confident about the future.”
CIMB maintains its Overweight stance on container shipping, as “order book relative to the existing fleet is light compared to the bulk and tanker sectors.”
Though the house expects an interim dip in freight rates in 2011 after a strong 2010, “rates should move up again in 2012 and beyond as supply growth is set to moderate and demand growth will pick up pace.”
Singapore’s Neptune Orient Lines (NEPS.SI) (NOL), the world’s sixth-largest container shipping firm, carried 6% more containers in the four weeks to Nov 12 compared with a year ago.
NOL said in a statement it shipped the equivalent of 220,800 40-foot containers (FEU) on its vessels in the period, up from 208,000 a year earlier, due mainly to higher volumes carried on the intra-Asia and Asia-Europe trade lanes.
The average revenue in the period from each container was $3,649, up 25% from the year ago period.
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Singapore shares may open tad lower on Tuesday after Wall Street indices were mostly flat as investors chose to wait on the sidelines amid uncertainty over the euro zone’s debt woes and as the year-end approaches. Singapore’s benchmark Straits Times Index <.FTSTI> rose 0.28% on Monday to 3,181.41 points.
Here are some stocks and factors to watch:
Citigroup upgrades Neptune Orient Lines (N03.SG) to Hold from Sell, says FY11E P/B at 1.2x looks fair vs liner peers, fair vs FY11E 11% ROE.
Raises target price to $2.40 from $1.80 due to higher BVPS estimates in line with higher earnings forecasts, which Citi raises by 23% in FY11E, 178% in FY12E (off low base).
"We turn less pessimistic on 2011E outlook (for freight rates) on hopes of increased capacity discipline. We turn more constructive on 2012+ outlook, as new supply appears to be limited and shipyards’ 2012 slots are fully booked. We see upside to 2012+ freight rates."
Adds, key downside risks for stock include faster-than-expected U.S. consumer slowdown, less-than-expected supply, capex discipline by major industry players, faster-than-expected onset of additional capacity.
Shares down 0.9% at $2.16.
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Macquarie downgrades Neptune Orient Lines (N03.SG) to Neutral vs Outperform, says Dow Jones.
“We have now had two updates (from the company) with lower rates and could see a few more as the slack season progresses. This in turn could weaken sentiment on the shares in the near term,” says the research house.
But notes, container shipping group has been shifting vessels to buoyant intra-Asia routes from less busy trade lanes. Cuts target price to $2.25 vs $2.50, based on 1.2x FY11 P/B, to reflect lower SGD-denominated book value as company reports earnings in USD but shares trade in SGD. Stock +1.3% at $2.27.
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Pullback by DJIA, S&P 500 overnight may prompt investors to take profits on Singapore shares after yesterday’s strong run-up, which lifted STI to highest level since January 2008, +1.9% at 3,300.40.
Support for benchmark eyed at yesterday’s 3,257 intraday low. Local corporate earnings will continue to be in focus, with Sembcorp Industries (U96.SG), Armstrong Industrial (A14.SG) among latest to report results.
Raises 2010 net profit estimates by 52.0% to US$384 million, 2011 forecast +57.1% at US$457 million, 2012 forecast +46.5% at US$593 million due to better shipping volumes, rates.
