Excerpts from latest analyst reports......
CIMB-GK advise investors to accumulate NOL after recent stock sell-down
Analyst: Raymond Yap
CIMB-GK's target price for NOL is $2.50
Cumulatively, the average freight rate in P4 was 22% higher since the start of the year.
Investors can expect:
1) more freight rate upside once the new rates from the transpacific contract negotiations take effect, mostly from P6 onwards, and
2) the likely implementation of peak season surcharges given that TP demand continues to be strong and spot rates show no signs of fatigue.
These will be the key potential re-rating catalyst for the stock, and we advise investors to accumulate NOL after the recent share price sell-down.
We maintain OUTPERFORM and target price of S$2.50, based on an unchanged 1.8x P/BV multiple.
... but Credit Suisse downgrades NOL to 'neutral'
Analyst: Sam Lee
We remain positive on NOL’s earnings outlook and recovery on the successful transpacific rate hike (NOL has the highest 50% revenue exposure to the transpacific trade). That said, the stockhas already outperformed the local market and its peers on rising expectations about the transpacific contract renewal, and we think most of the good news has been largely priced in. As our targetprice offers only limited upside, we downgrade NOL to NEUTRAL.
● Based on its stronger-than-expected 1Q10 results, we upgrade our FY10-12E estimates. We now expect NOL to make US$189 mn profit (versus our previous estimate of US$153 mn loss), and revise our FY11-12E earnings by 67% and 14%, mainly on stronger volume and lower unit cost assumptions.
● NOL is trading at 1.1x forward P/B, around its historical average. We base our target price at S$2 on 1.3x forward P/B, the midpoint of its historical average and one standard deviation above.
While we have turned more cautious on NOL, we think a further rerating could be possible, if the uncertainty about a weaker Europe clears up and/or earnings momentum proves stronger than expected. If NOL’s P/B returns to the previous peak cycle P/B of 1.8x or above, its share price could reach S$2.80 or higher
OCBC Investment Research pegs the fair value of Tat Hong at 97.5 c.
Analyst: Lee Wen Ching
Tat Hong Holdings' (Tat Hong) 4Q10 results surpassed our expectations.
Revenue grew 18.3% YoY to S$130.9m while net profit declined by 32.8% YoY to S$9.8m due to lower associates' contribution.
For the full year, revenue slid 21.6% to S$495.4m and net profit dipped 44.0% to S$38.6m, but still beat our estimate by 11%.
A final dividend of 1.5 S cents has been declared.
Three out of five segments turned in revenue growth in 4Q10. In particular, Equipment Sales, which was the hardest hit during the credit crunch, surprised with a stellar 68.8% YoY jump in sales to S$50.2m.
With Australia's construction industry showing signs of a pick up in activity, Tat Hong appears poised for a year of earnings recovery in FY11.
We have raised our estimates and upgrade our rating to BUY with a fair value estimate of S$0.975 (previously S$0.86).
…and Credit Suisse rates Tat Hong ‘outperform’
Analyst: Su Thye Chua
Tat Hong reported 4Q FY10 results, with revenue of S$495.4 mn (-22% YoY) and net profit of S$38.6 mn (-44% YoY). Full-year earnings were behind our estimates on weaker-than-expectedgeneral rental revenue and associate contribution during 4Q.
● While results fell short, momentum in growth as well as profitability is picking up. We believe this should be supported by a distinct turnaround in equipment sales (+69% YoY in 4Q10), andTat Hong’s fleet expansion plans, as well as improving crawler and tower crane rates going forward.
● We have factored in more optimistic margin assumptions for the crane rental business, but cut our growth assumptions on general rental operations. Our earnings forecasts are cut by 2-4% throughFY11/12.
● With Tat Hong’s outlook improving, valuations are undemanding at 8x FY11E P/E on a 32% EPS CAGR through FY10-13E. Our new DCF-based target price of S$1.20 (up from S$1.15) implies
36% potential upside. We reiterate our OUTPERFORM rating.
