CLSA initiates coverage with a S$1.70 target price, calling the stock “Underperform”.
CLSA says, trading at 1X P/B, “NOL is neither expensive with an average 2012 to 14 ROE of 10.3 per cent nor compelling with past earnings slumps offering investors trough-0.4X P/B as a cyclical entry point.” Earnings forecasts remain materially below consensus in 2011 to 2012, “so until expectations are reset, NOL will underperform.” On NOL’s recent vessel purchase, it says “the fleet renewal provides NOL with an opportunity to remain relevant on European trade, as well as significantly reduce its unit costs”.
For the record, there have been mgt changes over the last few months with experienced mgrs leaving and an ex-general from Temasek joining.
In June NOL had its third executive resignation in less than two months, when Eng Aik Meng, president of APL – NOL’s liner arm – resigned. He will leave APL on Sept 1 and take a new position “outside the transportation industry”. Mr Eng will be replaced by Kenneth Glenn, who is currently based in Shanghai as president of APL’s North Asia region. Mr Glenn has been in the industry for 32 years and joined APL in 2000.
This change comes days after the stepping down of Bob Sappio – head of the shipping line’s Pan- American Trades It is also the second leadership change following news of the replacement of Mr Widdows, with Temasek executive Mr Ng, in April.
NOL executive director Ng Yat Chung will become chief executive officer of NOL when Mr Widdows retires at the end of the year. He is a ex-general, not admiral, from the SAF.