NOL veers towards gains amid 14.1% spike in China exports

A good start to 2013.

According to Maybank Kim Eng, China exports kick off 2013 with pleasant surprise. Chinese exports rose 14.1% YoY in December, solidly beating street estimates of 4-5%. Imports also rose, climbing 6% YoY.

This news was likely the key driver for NOL’s share price spike of 7.2% within a single day, and the firm sees this as affirmation of their view that Chinese export growth will continue to gain momentum.

Here's more from Maybank Kim Eng:

Our economists have forecast a faster export growth of 11.4% YoY in 2013 compared to 8.3% YoY for 2012, and believe that China’s exports are past their trough.

With firmer visibility now on global trade recovery, we believe NOL is due for a re-rating based on 1.4x FY2013 P/BV, and adjust our Target Price accordingly to SGD1.71.

Steady recovery in container shipping. Encouragingly, the Chinese containerized freight indices (CCFI and SCFI) have shown a recent up-tick to kick-off 2013 as well. We forecast freight rates, especially those of the Trans-pacific trade will be sustained at profitable levels through a mix of controlled capacity and an economic recovery led by the US.

Exposed minimally to Europe, Most to US. Compared to its regional peers, NOL boasts an enviable mix of prominence on a more profitable route – the Trans-pacific trade (~40% of revenue), while minimizing exposure to the poorly-performing Asia-European trade (only ~15% of revenue).

This is helped by the fact that infrastructure in most US ports are not able to handle the largest new mega-vessels coming on-stream, which keeps capacity growth on the route relatively subdued.

We believe NOL’s strength in the Trans-pacific trade will be the key to a profitable 2013, providing a springboard to an even better 2014 when the capacity situation abates.