Brokers' Take: Goldman Sachs upgrades NOL to 'buy' on brighter trans-Pac outlook

GOLDMAN Sachs raised its call on Neptune Orient Lines (NOL) to "buy" from "neutral" with a target price of S$1.30 on expectations of growth in trans-Pacific trade.

NOL shares traded at 89.5 Singapore cents as at 11.41am on Wednesday, down by 1.1 per cent or one Singapore cent.

The broker expects the trans-Pacific sector to outperform in 2015 as low oil prices and mild congestion help to support bottom lines and reverse two dismal years.

NOL's APL liner business has close to a 50 per cent revenue exposure to trans-Pacific trade, putting it in line to benefit from an improvement in that sector, Goldman Sachs said in a note.

NOL's balance sheet should also improve after the disposal of APL Logistics, which is expected to be completed in the second quarter of the year.

Goldman Sachs noted that NOL is one of the cheapest stocks among shipping counters, and that there could be potential merger and acquisition opportunities as the industry consolidates.