Deutsche Bank Markets Research Rating

Company

Buy

Neptune Orient Lines Alert

Asia

Date

14 May 2015

Results

Singapore Transportation

Marine

Reuters NEPS.SI

Bloomberg NOL SP

ADR Ticker NPTOY

ISIN US6407732063

Exchange Ticker SES NEPS

Price at 14 May 2015 (SGD)

1.10

Price target - 12mth (SGD)

1.36

52-week range (SGD)

1.18 - 0.74

Straits Times Index

3,453

1Q results : Cost savings offset rate and volume weakness

Joe Liew, CFA

Net loss of US$11m in 1Q 2015, big improvement y/y NOL’s 1Q volume was down 15% y/y and average freight rate was 8% lower y/y. Commendably, management reduced costs to achieve a significantly better bottom line. The US$11m loss in 1Q 2015 was much better than the US$98m loss last year. Besides bunker price fall savings of US$103m, they also had network improvements drive US$155m worth of cost savings. Liner EBIT went from a loss of US$82m last year to a positive US$11m this year. We consider the results within our expectation but the street may be slightly disappointed given consensus net profit of US$89m.

Market cap (SGDm)

2,868

Market cap (USDm)

2,164

Cost savings should continue Going forward, management continue to warn of persistent overcapacity in the industry and uncertain global economic prospects. They will continue to try to adjust capacity to improve profitability. We think bunker fuel cost savings will help and so will the expiry of expensive vessel charter-ins. However, recent weakness in Asia-Europe spot rates is a headwind. Key catalyst for the stock is the sale of APL Logistics The company maintains that they expect to complete the sale by mid 2015. The US$1.2bn cash proceeds from the sale will help dramatically reduce its net gearing of 2.21x at the end of 1Q 2015. Fortunately, capex commitments are on the decline. Capex was US$33m in 1Q 2015 versus US$248m in 1Q 2014. The stock is trading at 0.8x 2015E P/B and, hence, it appears as if the rate weakness we have seen so far this year has been priced-in. Our Buy thesis hinges on the completion of the sale of the logistics business and a better business outlook next year.

Research Analyst (+65) 6423 8507 [email protected] Stock data

Shares outstanding (m) Major shareholders

2,595.2 Temasek (67%)

Free float (%)

34

Avg daily value traded (USDm)

6.8

Source: Deutsche Bank

Key data FYE 12/31 Sales (USDm) Net Profit (USDm) DB EPS (USD) PER (x) Yield (net) (%)

2014A 8,617 -259.8

2015E 8,301 970.1

2016E 8,016 185.6

-0.09 – 0.0

0.01 107.6 0.0

0.07 11.7 2.1

Source: Deutsche Bank

________________________________________________________________________________________________________________ Deutsche Bank AG/Hong Kong The views expressed above accurately reflect the personal views of the authors about the subject companies and its(their) securities. The authors have not and will not receive any compensation for providing a specific recommendation or view. Deutsche Bank does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. FOR OTHER IMPORTANT DISCLOSURES PLEASE VISIT http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=NEPS.SI MCI (P) 124/04/2015.