NOL faces fall in European rates
Neptune Orient Lines, South-east Asia's largest sea-cargo carrier, may report lower Asia-Europe freight rates in the second half of the year as volume growth on the trade lane slows, UBS said.
UBS analysts Alex Chang and Ronald Keung lowered earnings per share estimates for the company by as much as 8 per cent between 2008 and 2010, according to a report last Friday.
UBS also cut the target price for the shipping company's stock by 15 per cent to $3.30 while retaining a 'neutral' rating.
'The weakening of conditions on the Asia-Europe route drives our expectation that freight rates on this trade will fall across the industry in July and September,' the analysts said. The rates will still be higher than last year's and the route will remain profitable, Messrs Chang and Keung said.
Rising demand for low-cost goods made in Asia helped NOL to boost rates on the European route, its fastest-growing lane, and triple profits in the first quarter. That cushioned the effect of a slowdown in the US and rising fuel costs.
The average cost of moving a 40-foot box to Europe gained 25 per cent in the first quarter to US$3,216, the company said on May 14. Rates to the American region increased 7 per cent to US$3,486.
A possible bid by NOL for TUI's Hapag-Lloyd shipping unit may also add to risks for the company, the analysts said. NOL in the past has said that it's 'actively looking' at acquisitions. 'Expectations of a difficult global economy or container shipping industry in the next one-two years may raise concerns about the timing of the acquisition,' the report said.
'Short-term risks are considerable, in our view, including the risk of overpaying, integration costs.'
NOL spokesman Paul Barrett was not available for comments yesterday.
Hapag-Lloyd is ranked fifth by capacity, while APL Ltd, NOL's container shipping unit, is eighth, according to Containerisation International.
A combined company would have the capacity to carry more than 880,000 20-foot equivalent boxes, putting it behind the shipping division of AP Moeller-Maersk, and Mediterranean Shipping.
NOL gained 16 cents or 5.3 per cent to $3.17 yesterday. The shares have dropped 22 per cent this year.
UBS analysts Alex Chang and Ronald Keung lowered earnings per share estimates for the company by as much as 8 per cent between 2008 and 2010, according to a report last Friday.
UBS also cut the target price for the shipping company's stock by 15 per cent to $3.30 while retaining a 'neutral' rating.
'The weakening of conditions on the Asia-Europe route drives our expectation that freight rates on this trade will fall across the industry in July and September,' the analysts said. The rates will still be higher than last year's and the route will remain profitable, Messrs Chang and Keung said.
Rising demand for low-cost goods made in Asia helped NOL to boost rates on the European route, its fastest-growing lane, and triple profits in the first quarter. That cushioned the effect of a slowdown in the US and rising fuel costs.
The average cost of moving a 40-foot box to Europe gained 25 per cent in the first quarter to US$3,216, the company said on May 14. Rates to the American region increased 7 per cent to US$3,486.
A possible bid by NOL for TUI's Hapag-Lloyd shipping unit may also add to risks for the company, the analysts said. NOL in the past has said that it's 'actively looking' at acquisitions. 'Expectations of a difficult global economy or container shipping industry in the next one-two years may raise concerns about the timing of the acquisition,' the report said.
'Short-term risks are considerable, in our view, including the risk of overpaying, integration costs.'
NOL spokesman Paul Barrett was not available for comments yesterday.
Hapag-Lloyd is ranked fifth by capacity, while APL Ltd, NOL's container shipping unit, is eighth, according to Containerisation International.
A combined company would have the capacity to carry more than 880,000 20-foot equivalent boxes, putting it behind the shipping division of AP Moeller-Maersk, and Mediterranean Shipping.
NOL gained 16 cents or 5.3 per cent to $3.17 yesterday. The shares have dropped 22 per cent this year.