FY08 core net profit was 24% below our forecast and 32% below consensus, with higher taxes, depreciation and exchange losses accounting for the variance. EBITDA was in line with our projection. NOL declared a tax-exempt final DPS of 4 Scts, taking full-year payout to 8 Scts, which is in line with the minimum dividend policy. However, going forward, the dividend policy will be changed to 20% of net earnings, suggesting that in loss-making years, no dividend will be paid.
NOL booked a 4Q08 net loss of S$148.5m, including a S$72m restructuring charge for the termination of 1,000 employees, against a S$195.7m profit a year ago. This was NOL’s first liner division loss since the 2001/02 downturn, driven by quarterly falls in volume and underlying rates despite higher unit costs.
Maintain UNDERPERFORM; earnings downgrade and lower target price of S$1 (from S$1.30). Our target price is based on an unchanged trough valuation of 0.5x P/BV (peak at 2.5x). We have cut forecasts from net profits of S$67m and S$170m for FY09 and FY10, to net losses of S$331m and S$100m respectively.
Source: CIMB, 11 Feb 2009
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