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Tuesday, February 16, 2010

Wrong buy on Neptune Orient Lines (NOL)

It is getting clearer that my buy on Neptune Orient Lines (NOL) is a wrong and expensive one after all. In just one month, the stock has since fallen 11 per cent.

What has resulted in the drop? Fundamentals have shown the shipping industry though recovering, the possibility of shipping companies like NOL seeing red in the first half of 2010 is still real.

Last Thursday, NOL announced larger-than-expected FY2009 losses of US$741 million ($1 billion) on the back of a 30 per cent drop in revenue to US$6.52 billion. It is anticipated that the downward pressure on freight rates, owing to the oversupply of tonnage, is likely to weigh on NOL's profitability. This still-gloomy trend will affect other shipping companies too. Due to overall losses, no distribution is announced for FY2009.

Let's hope FY2010 will be a better year for the shipping industry. Looking on the brighter side, the rest of my old and new holdings still remain relatively healthy.

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