NOL Upgraded to "Buy" on Back of "Significant Cost Savings" from Low Bunker Prices

by Ship & Bunker News Team
Tuesday January 20, 2015

Neptune Orient Lines (NOL) [SGX:N03] has been upgraded to "buy" from "hold" by DBS Vickers analyst Suvro Sarkar, who says the operator will not only benefit from low bunker prices but potentially has more to gain having lagged behind its peers in fuel efficiency measures, The Edge Markets reports.

He also raised his price target to $1.10 from 88 cents. 

"Given that NOL’s liner business consumes about three million metric tonnes of bunker fuel per year, this implies significant cost savings," said Sarkar. 

"The fact that NOL has lagged its peers in terms of fuel efficiency and margins in the past means there is more room for improvement, given the razor thin margins involved."

Plummeting oil prices, which have reached five-year lows, have driven down bunker prices which Ship & Bunker data shows were around $600 per metric tonne (pmt) for the first 9 months of 2014, but have now fallen to less than $300 pmt. 

Healthy demand along the Transpacific route due to continued shale gas production in the U.S. will also help NOL's bottom line, with DBS Vickers hiking the firm's projected earnings to $203 million from $46 million. 

At the end of the first quarter last year, NOL reported a loss of $98 million. 

Ship & Bunker News Team
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