Will NOL benefit from new TSA rate hikes?

Not likely due to an existing oversupply that discourages significant lifting of cargo rates, warns PhillipCapital.

The Transpacific Stabilization Agreement recently put forward proposals to hike freight rates by March, which would be a boon for NOL in theory.

But the shipping and logistics firm will be hard-pressed to capitalize on them due to a sea of industry rivals ready to compete on lower prices.

Here's more from PhillipCapital:

We view these potential rate hikes as a necessary step for the industry to combat high operating costs from rising Bunker prices. Despite the desire to lift freight rates, a significant growth in industry supply this year could limit carriers’ ability to fully implement the proposed rate increase.

Hence, we caution that NOL is likely to remain in the red for FY12E, as we believe that any possible rate increase in the coming months would be offset by high operating costs. We adjusted our FY11E estimates after incorporating NOL’s weaker than expected P12 freight rate, but trimmed our loss estimates for FY12E as we lifted our freight rate assumptions for the year.