NOL’s 3Q2012 USD50m NPAT as forecast. Our forecast of NOL’s 3Q2012 Net Profit of USD50m was spot-on, as the company posted its first net profit in seven quarters, benefiting from heightened freight rates (+2% YoY) and container volumes handled (+1% YoY). NOL also announced the sale of its headquarters (NOL Building) for a price of SGD380m, netting a cool one-time gain of ~SGD246m (USD196m), which translates to ~US 7.6 cts/share (8.4% of current NAV).

Revenue: Freight and Volume below expectations. Our freight and container volume forecasts in our 3Q2012 results preview note were marginally optimistic when compared to NOL’s reported 3Q2012 figures. NOL’s actual Rev/FEU and container volume handled were 5% and 3% below our forecast levels respectively. This translated to NOL’s actual revenue being 6% lower than our forecasts, and could prove to be a sign of weaker-than-expected 4Q freight and volumes to come.

Logistics chugging along just fine. NOL’s Logistics segment reported a commendable 19% YoY increase in Core EBIT for 3Q2012 (USD19m), boosted by higher volumes across various Logistics services. This segment will also be one to watch as NOL aims to grow the segment to contribute 30% of group revenue in the next few years.

Family home cashed in for USD196m profit. The NOL Building was sold to the Fragrance Group, with the one-time gain expected to be realized in Feb 2013 (upon completion). This boosts our forecast of NOL’s FY2013 NAV, and corresponding P/BV valuation by 8.2%.

Reiterate BUY - Don’t miss the boat. We take NOL’s first net profit in seven quarters as a firm sign of a turnaround in the sector. 2014 will provide the plump rewards for shipping lines able to endure a potentially challenging 2013 supply situation. Our view on NOL as a strong contender to benefit from the industry up-cycle is maintained - reiterate BUY, Target Price increased to SGD1.46 based on 1.2x of the revised FY2013 NAV incorporating the sale of NOL Building.

Source: Maybank Kim Eng Research - 29 Oct 2012