OOIL recorded a net loss of US$56.7m in 1H 2016
Bloomberg consensus is for a full year net profit of US$163m and we have afull year net profit forecast of US$88m. Hence results were belowexpectations. Stripping away the investment income from Hui Xian and therevaluation of Wall Street Plaza would have caused pretax loss to increasefrom US$47.5m to US$82.4m. The company said that the challenging marketconditions at the end of 2015 continued into the first half of 2016. Weak globalgrowth and continued delivery of large vessels generated an unfavourablesupply and demand balance for the industry. OOIL’s liner liftings increased 5%y/y and load factor went up 1% y/y, but revenue dropped 17% y/y. Averagerevenue / TUE dropped 21% y/y in 1H 2016. No interim dividend was declared(US 9.6 cents a year ago).
Management outlook
Management commented that 2H 2016 will be challenging and difficult as theindustry continues to face a supply and demand imbalance. OOIL also worriesabout the longer term demand trend because of uncertainties in China andEurope.
Our view
We have a Buy recommendation because the stock looks cheap at less than0.5x 2016E P/B but we do agree that industry headwinds will constrain shortterm share price performance.