Remained profitable in 2H 2015
OOIL’s net profit of US$284m for 2015 was higher than our US$212m forecastbut close to Bloomberg consensus of US$260m. 1H net profit was US$239mmeaning that 2H2015 was a slim US$45m, reflecting the weak rates andchallenging operating environment. The lower fuel prices were not enough tooffset the industry-wide fall in rates. In 4Q 2015, OOIL’s total volume increaseda small 2.0% y/y while average rates were down 17.3% y/y.
2016 outlook: We think demand prospects are cloudy
Management commented that 1Q 2016 can be characterized by greatuncertainty. They think it is conceivable that freight rates might fall further insome trades, which may force liners to reduce deployed capacity. They expecta challenging year for the industry. We have a Buy recommendation becausethe stock looks cheap at 0.5x 2016E P/B and hence we think a lot of thenegative news has been priced-in. This set of results we think will continue toshow that OOIL is one the better managed names in the industry with marginsahead of peers. Balance sheet remains healthy with net gearing of 37% at theend of 2015.