Friday, November 29, 2013

COSCO Corp: Time needed to scale offshore value chain (OCBC)

COSCO Corp:
Fair value S$0.61
add: 12m dividend forecast S$0.005
versus: Current price S$0.73
Time needed to scale offshore value chain

2013 is looking to be the weakest year in terms of earnings for COSCO Corp (Singapore). After recording net profit of S$139.7m and S$105.7m in FY11 and FY12, respectively, net profit for FY13 looks set to be below S$50m. Indeed, after five quarters of either little cost overruns or reversal of provisions made earlier, COSCO returned to making provisions on its construction contracts again, dousing hopes that it is gaining footing on the execution front. Looking ahead, we expect the operating environment for the group to remain difficult. Any credit tightening in China may also affect the ability of customers to meet their financial obligations. Maintain SELL with S$0.61 fair value estimate.


2013 – a year to forget
2013 is looking to be the weakest year in terms of earnings for COSCO Corp (Singapore). After recording net profit of S$139.7m and S$105.7m in FY11 and FY12, respectively, net profit for FY13 looks set to be below S$50m. Indeed, after five quarters of either little cost overruns or reversal of provisions made earlier, COSCO returned to making provisions on its construction contracts again, dousing hopes that it is gaining footing on the execution front. For 4Q13, the group may even have to reverse profits on its “substantially completed” drillship that is mired in arbitration proceedings with customer Dalian Deepwater Development, unless COSCO is able to quickly find another buyer for its drillship.

2014 – also looks challenging
Looking ahead, we expect the operating environment for the group to remain difficult. The oversupply of yard capacity in China continues to roil the shipbuilding industry. Outlook for the offshore industry is more positive, but COSCO – being a new entrant – may not be able to secure many good quality contracts, and the fact that it is executing a wide range of products that are new to the company means that margins remain vulnerable to execution risk.

Headwinds remain; maintain SELL
As of 30 Sep 2013, the group’s order-book stood at US$7.2b with progressive deliveries up to 2015. However, many orders are likely to be executed at low margins. Though the group has a cash level of S$1.7b, it also has S$1.85b worth of debt maturing in a year (36% of which is secured and may be rolled over), not forgetting the substantial working capital that the group needs with its back-end loaded payments for its contracts. Moreover, any credit tightening in China may affect the ability of customers to meet their financial obligations. Maintain SELL with S$0.61 fair value estimate.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 28/11/13

No comments:

Post a Comment

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
  • Selected Indexes 52 week range

  • Margin of Safety

    Investment Clock

    World's First Interactive Investment Clock