NOL’s share price plunged 20% since August

Is a turnaround likely for the shipping giant?

Neptune Orient Lines has been sailing through turbulent seas since it revealed on August that it is mulling the sale of its profitable logistics unit. According to Barclays, NOL’s share price has plunged by 20% since the announcement, which was compounded by disappointing losses in the third quarter.

However, Barclays noted that NOL may well be on track to an earnings recovery in 4Q14 until the end of 2014. NOL will finally break even in the fourth quarter on back of lower bunker costs.

“In our view, NOL's share price has been depressed by the proposed sale of its logistics unit (18% of 2013 revenue) and disappointing YTD 3Q14 losses of S$0.09/share from weak freight rates and slower-than-peer cost cutting.

However, we see upside potential from an expected 4Q14 earnings recovery on lower fuel prices. However, we still expect NOL to produce lower-than-industry-average returns in 2015. A key risk to our price target is the potential for external financing due to NOL's high leverage,” stated Barclays.