Published March 11, 2009

NOL sinks below $1 on talk of rights issue

By VINCENT WEE
Email this article
Print article
Feedback

NEPTUNE Orient Lines (NOL) shares fell prey yesterday to market talk of a potential rights issue by the Singapore national shipping line to raise more than US$250 million.

Looking down: NOL's data for the Dec 27-Feb 6 period show fall in freight volume and average revenue per forty-foot equivalent unit

On a day when Chartered Semiconductor Manufacturing shares plummeted following news of a US$300 million rights issue, the stock of NOL sank below $1, falling as much as 12.7 per cent to 89 cents before closing 8.3 per cent lower at 93.5 cents. This on a day when the Straits Times Index recovered from Monday's losses to close nearly 2 per cent up at 1,485.75.

Reacting to the share price fluctuations, NOL said in an announcement: 'NOL wishes to announce that in the course of its business, the company continually evaluates all available options to improve its performance and strategic position. We confirm that the company has not entered into any agreements that would require disclosure in accordance with the SGX-ST listing rules.'

Rumours that NOL could be the latest in a string of fund-raising exercises by Temasek-linked companies (TLCs) followed the launching by Chartered Semiconductor Manufacturing on Monday of a US$300 million rights issue. The news of Chartered's move came on the heels of CapitaLand's $1.8 billion cash call last month and DBS' $4 billion rights issue in December.

NOL said at its full-year results briefing that it had arranged a 'considerable size' of committed revolving credits which remained valid and available to draw on and of which a large part remained undrawn.

It also disclosed that it had slashed estimated capital expenditure for FY2009 to US$142 million from US$882 million spent in FY2008. NOL has 28 new vessel commitments to be delivered from this year onwards. One has been delivered so far with another 12 due by the end of the year.

The new vessels are coming onstream at a time of low freight rates and massive overcapacity in the container line sector.

Around 10 per cent of the world fleet is laid up and NOL itself has 15 vessels idled as at February. NOL's latest operating numbers for the six weeks from Dec 27 to Feb 6 show average revenue per forty-foot equivalent unit (FEU) fell to US$2,646, which is 9.4 per cent down from the previous month and 11.5 per cent lower year-on-year. Volume meanwhile plunged 35 per cent to 188,400 FEUs from 289,400 FEUs in the same period last year.

Expressing caution at what it called a 'freight-mare' of downward pressure on Transpacific rates and few signs of recovery on Asia-Europe rates, BNP Paribas on Monday initiated coverage of NOL with a 'reduce' rating and a target price of 75 cents.

'We believe the stock price will underperform due to greater than expected losses in 2009 and 2010,' the report said.