1H15 recurring profit of USD223m (9.5% ROE) better thanexpected on lower-than-expected cargo cost
While pressure on freight rate should continue in 2H15e, weexpect OOIL to maintain above-industry margin
Reiterate Buy rating and HKD50 TP based on a 0.8x 2016ePB; analyst briefing at 11.15 AM HKT
Better-than-expected 1H15 results: OOIL reported a profit of USD239m in 1H15, up 32%y-o-y: Excluding one-offs, we estimate recurring profit was USD223m (9.5% ROE), up 37%y-o-y and 10% above our forecast. We attribute this to lower bunker fuel (down 38% y-o-y)and better cost control. Note that our forecast is 26% below consensus on 2015e.
Management remains cautious on 2H, hopeful for 2016: In the results announcement,OOIL stated that pressure on freight rate will continue in the near term with record vesselsdelivery amidst disappointing demand outlook. However, looking into next year, theindustry takes comfort that scheduled new deliveries are relatively limited.
Reiterate Buy rating with an unchanged TP of HKD50: Y-t-d, OOIL’s share price isdown 12 vs. a 4% increase in the Hang Seng index and is now trading at a 0.6x 2016e PB.We reiterate our Buy rating on OOIL with an unchanged target price of HKD50, based ona 0.8x 2016e PB with average ROE of 5.5% (2015-16e).