Tuesday, August 6, 2013

COSCO Corp (Singapore): Another weak quarter (OCBC)

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

Another weak quarter
• 2Q net profit fell 56% YoY
• Susceptible to a credit squeeze
• Maintain SELL with unchanged S$0.60 FV

COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group’s balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60.


1H12 results below consensus
COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13 forecasts. We keep our estimates unchanged.

Operational review
During the recent quarter, turnover from shipyard operations decreased 9% YoY to S$877m, mainly due to lower contribution from shipbuilding and repair segments, which more than offset the growth in marine engineering segment. Turnover from drybulk shipping and other businesses also declined by 10% YoY to S$13.1m on lower freight rates. Other income fell by 53% YoY to S$16.0m, largely the result of lower value of scrap metals and exchange loss from the strengthening of RMB against USD. Administrative costs rose by 20% to S$47.7m due to provisions made for receivables impairment.

New orders likely to fetch low margins
As of 1H13, the group’s order-book stood at USD6.7b with progressive deliveries up to 2015. Although it looks stable, the orders are likely to fetch low margins due to stiff market competition. Also, the backend loaded payment terms of the new orders would put pressure on COSCO’s debt-laden balance sheet (with net debt-to-equity ratio of 1.4x and S$1.3b of loans due within 12 months). Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 02/08/13

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Warren E. Buffett(沃伦•巴菲特)
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别人贪婪时我恐惧, 别人恐惧时我贪婪
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做自己熟悉的事,等到发现大好机会才投钱下去

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“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

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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。

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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。
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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!
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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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