[Dow Jones] NOL (N03.SG) is flat at S$1.53, off its S$1.56 intraday high but remaining above water in a broadly lower market after announcing new shipbuilding orders and order upgrades worth $1.54 billion. Morgan Stanley says the orders position NOL positively for the long term. “These competitively priced ships sharply reduce NOL’s cost base via lower asset costs, improved fuel efficiencies (younger fleet and new technologies), and economies-of-scale.” It notes, container industry dynamics give the eventual advantage to the company with lowest unit costs, though conversely, this heightens concerns that the container shipping industry could face surplus supply in 2014, should demand be less robust. The house notes NOL’s total new orders now represent 60% of its current capacity, for delivery over 2012-2014, offset by chartered-in ships expiring, so implies nominal capacity growth of 11%-15% from 2012-2014 (without accounting for deployment factors like slow steaming).
It adds, stock weakness is an opportunity to accumulate with current valuations “very attractive on a six-month view.”
– by Matthew Allen, Dow Jones Newswires