BULLSEYE88 wrote: The current deep discount of Neptune Orient Lines' share price to its book value is not warranted as investors have overreacted to the shipping group's weak results and ignored the potential sale of its logistics business, says UOB Kay Hian.
The stock has fallen 34% so far this year and trades below its latest net asset value of 73 US cents (91.3 Singapore cents) a share. This month alone, it has retreated 11.4%, ending at a multi-year low of 74 cents yesterday. Its current valuation of 0.74 times projected 2015 book value is "very cheap" compared to its historical range of 0.9 to one times and an average of 0.8 times for its peers, according to UOB Kay Hian, which has a "buy" call and $1.01 price target on NOL.
"The current valuation discount is not justified," said the broking house. "If the market downgrades NOLs valuation due to the potential sale of the logistics business, the market should also include the potential disposal gain in 2015s book value." Assuming the logistics business is sold for US$720 million, which is lower than market expectations of US$1 billion, NOL's book value per share in 2015 would rise by 17 US cents to 96 US cents, said UOB Kay Hian. At that value, the stock trades at "only" 0.6 times price-to-book, it said. "We expect the price downside is very limited for NOL." The shipping line, which said in August that it had plans to sell or list its logistics business, reported last month a net loss of US$23 million for 3Q2014, reversing earnings of US$20 million a year earlier, owing to lower freight rates and container volumes.
Oil price down so much, I am sure NOL will do better in 2015, possibly an earnings turnaround. The macro pic is still not great ---> why ? cos overcapacity. It will take some more time before things adjust themselves , ie demand for container shipping picks up with global econ growth and/or the supply side rightsizes itself. (82 cents : perhaps a trading stock)
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