Thursday, November 7, 2013

Cosco : Dragged by cost overruns (DBSV)

Cosco Corporation
FULLY VALUED S$0.790
STI : 3,205.54
(Downgrade from HOLD)
Price Target : 12-month S$ 0.76 (Prev S$0.83)
Dragged by cost overruns

• 3Q13 below on massive provision for cost overruns
• Earnings disappointment and overhang from drillship legal case may pressure share price
• Downgrade to FULLY VALUED, TP cut to S$0.76

2Q13 below due to forex loss Worst quarter since 2008. Cosco’s 3Q13 net profit plunged 84% y-o-y and 65% q-o-q to a mere S$4.2m, a far cry from our and consensus expectations of S$16-20m.
This is the worst quarter since the loss-making set of results in 4Q08. Key culprit was the massive provision for project cost overruns amounting to S$33.9m. Cosco has also written down S$15.8m of inventory but this was offset by compensation of S$13.2m received from a customer. Overall gross and EBIT margins drifted lower to 7.4% (-4.9ppts y-o-y, -3.4ppts q-o-q) and 4.0% (-3.3ppts y-o-y and - 0.1ppts q-o-q). 9M13 earnings only made up 47% of our initial below consensus full year estimate.

Overhang from Drillship saga. Cosco has secured orders of US$2.2bn YTD, with orderbook inching up from US$6.7bn last quarter to US$7.2bn currently. Cosco has reportedly signed contracts for two drillships worth US$650-700m each with X-Drill but these have yet to be effective, probably pending financing. While order win momentum has been encouraging, we believe attention will switch to earnings delivery and potential financial impact from the drillship saga in the near term. We are unable to ascertain the expected cost overrun of the drillship project and provision that has been made thus far. In the results announcement, company stated that “it is difficult to quantify the eventual financial impact of the arbitration at this point”.

Still a long way to go. We have slashed our below consensus FY13F/14F earnings by a further 31%/23% to account for the provisions for cost overruns, leading to EBIT margins falling by 0.9ppts/0.5ppts. Our TP is reduced to S$0.76, on lower valuation multiple of 1.3x FY14 P/BV (1.4x previously). Downgrade to FULLY VALUED. We reckon the earnings disappointment and overhang from Drillship saga will take a toll on share price performance in the near term. The company will have to showcase its strong ability to win contracts and improve project execution, and translate its robust orderbook into decent earnings and margins to regain our confidence.


Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 06/11/13

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