Phillip Securities downgrades Neptune Orient Lines (N03.SG) to Hold from Buy due to limited upside of 11.6% from current share price to fair value estimate of $2.41, which is raised from $2.36 due to higher estimates.

The house is now more optimistic on the outlook of container shipping industry, while “NOL has also ordered new container vessels, which shows it is confident about the future.”

Raises net profit forecasts for FY2010 and FY2011, FY2012 by 23.4%, 35.8% and 14.3% to US$474 million ($622.7 million), US$621 million and US$678 million respectively.

Expects NOL to announce an annual dividend of $0.05 per share when it reports FY10 results in February, approximately 21.0% of its EPS. No dividend was paid in FY2009.

“As earnings continue to improve, we forecast annual dividends of $0.06 and $0.07 per ordinary share in FY2011E and FY2012E respectively.”

Shares up 0.5% at $2.17.

CIMB maintains its Overweight stance on container shipping, as “order book relative to the existing fleet is light compared to the bulk and tanker sectors.”

Though the house expects an interim dip in freight rates in 2011 after a strong 2010, “rates should move up again in 2012 and beyond as supply growth is set to moderate and demand growth will pick up pace.”

The house’s top pick in the sector is Neptune Orient Lines (NO3.SG), rated Outperform with a $2.63 target. It says NOL will benefit from structural cost reduction when it replaces 150,000 twenty-foot equivalent units of expensive chartered-in ships with cheaper owned tonnage in 2012-2013. NOL shares are flat at $2.19.

Singapore’s Neptune Orient Lines (NEPS.SI) (NOL), the world’s sixth-largest container shipping firm, carried 6% more containers in the four weeks to Nov 12 compared with a year ago.

NOL said in a statement it shipped the equivalent of 220,800 40-foot containers (FEU) on its vessels in the period, up from 208,000 a year earlier, due mainly to higher volumes carried on the intra-Asia and Asia-Europe trade lanes.

The average revenue in the period from each container was $3,649, up 25% from the year ago period.