Debt threat: NOL's net debt surges to US$2.9bn

Net debt-to-equity is now a whopping 126%.

HEre's more from BArclays:

2Q12 loss per share of 4.57 US cents: NOL announced attributable net income of US$118mn compared to 1Q12 loss of US$254mn and 2Q11 loss of US$57mn. 2Q included "one-time" charges of US$112mn, including US$29mn in restructuring charges and the balance from charges and loss on disposal of "obsolete vessels". 2Q12 loss per share of 4.57 US cents implies a 20%pa ROE from operations compared to 1Q12 loss per share of 9.83 US cents, a -43%pa ROE.

1H12 cash burn was equal to 30% of current equity: NOL burned through US$715mn in cash in 1H12, US$302 cash from operations and US$486mn in cap-ex. This was offset by US$733mn in new borrowings. Needless to say the balance sheet did not do well. Net debt increased to US$2.9bn from US$2.1bn YE11, combined with equity shrinking to US$2.3bn, from US$2.7bn. Net debt-to-equity is now 126% not including another US$2.2bn in off-balance sheet vessel operating leases.

Maintain UW and PT S$1.16: We are not positive on container shares prices over the next 6-12 months, as we expect spot rates to decline and valuations already generally reflect the 1Q12 rate increase that is now running through income statements in 2Q12 and 3Q12. NOL is currently trading at 1.1x current P/B, unfavourable compared to its recent trading range, with peers' outlook for declining profitability after 3Q12. See Marine Transport Update: Tapped out 16 May 2012 (link). NOL's 1H12 -22% ROE (after adding back the one-off charges) does not look favourable compared to peers such as OOIL (316 HK, EW) which managed a +5.4% pa 1H12 ROE and trades at 1.0x current P/B. See OOIL: 1H12 profit of US$117mn a good result 2 Aug 2012.