UOB KayHian reiterates Neptune Orient Lines (N03.SG) at Buy, with $2.55 target; expects 4Q10 container shipping markets to stand beyond market expectations, which “fairly low at the moment,” despite seasonal weaknesses in volume and rates. 

Notes, carriers have been more aware of significance of capacity adjustment since 2Q09 “so they are very likely to tighten capacity again if box volume falls faster than expected” consequently, rates would find support in slack season. Says NOL’s results might drive sector’s performance. 

 

Revises 2010-2012 earnings forecasts by +27.7%, down 2.5%, down 16.2% respectively; says target based on 1.4X 2011F P/B; “we believe NOL deserves a premium valuation vs its peers due to high value-added services, excellent operating flexibility and robust balance sheet.” Current 1.1X 2011F P/B “looks undemanding.” 

 

Shares +2.4% at $2.11 vs STI down 1.0%.