Tuesday, July 9, 2013

COSCO Corp (Singapore): Don’t catch a falling knife (OCBC)

COSCO Corp (Singapore):
Fair value S$0.60
add: 12m dividend forecast S$0.005
versus: Current price S$0.75

Don’t catch a falling knife
• Uncertain outlook
• Vulnerable to a credit squeeze
• Maintain SELL; Lower FV of S$0.60

COSCO Corp (Singapore)’s share price has fallen by about 14% since our last update (“Downgrade to Sell – Missed Expectations”, 6/5/2013) such that it is close to our previous S$0.76 FV. However, we do not think it is time to upgrade our call. The macro environment is looking increasingly gloomy. In China, an unexpected credit squeeze in the Chinese interbank market raised concerns over the fragility of the Chinese banking system.
The surprise was that the PBOC took an unusually tough line by refusing to inject liquidity, at least for a few days. Should the credit conditions deteriorate, we think that COSCO, with its large debt burden, will be vulnerable. The group’s net gearing climbed to 131% as of end 1Q13, from just 10% as of end FY10. We estimate about half of its existing debt (S$3.4b) would need to be refinanced within the next 12 months. Considering the risks, we cut our PBR peg to 1.0x (or 2 std dev below) and FV to S$0.60 (previously S$0.76). Maintain SELL.

Not time to upgrade yet
COSCO Corp (Singapore)’s share price has fallen by about 14% since our last update (“Downgrade to Sell – Missed Expectations”, 6/5/2013) such that it is close to our previous S$0.76 FV. However, we do not think it is time to upgrade our call. The macro environment is looking increasingly gloomy. China’s official PMI and the HSBC flash number have been hovering for several quarters around the 50-mark separating expansion from contraction for the manufacturing sector. This implies that the growth trajectory is uncertain. The IMF and OECD recently lowered their 2013 China growth forecasts to 7.75% and 7.8%, down from 8% and 8.5% respectively.

Susceptible to a credit squeeze
Meanwhile, an unexpected credit squeeze in the Chinese interbank market raised concerns over the fragility of the Chinese banking system. On 20th June 2013, the seven-day repo rate shot up to a record 12%. The surprise was that the PBOC took an unusually tough line in refusing to inject liquidity, at least for a few days. Should the credit conditions deteriorate, we think that COSCO, with its large debt burden, will be vulnerable. The group’s net gearing climbed to 131% as of end 1Q13, from just 10% as of end FY10. We estimate about half of its existing debt (S$3.4b) would need to be refinanced within the next 12 months. COSCO’s free cashflow is also likely to remain negative for the next few years, due to its low net profit margin and increasingly back-end loaded contracts in its order-book.

Lower FV to S$0.60
Considering the above mentioned risks, we cut our PBR peg to 1.0x (or 2 std dev below) and FV to S$0.60 (previously S$0.76). Maintain SELL.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 05/07/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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