Company Name: COSCO CORPORATION (S) LTD
Research House: Phillip Securities
Phillip Securities has raised its target price for Singapore-listed shipbuilder Cosco Corp (COSC.SI) to $2.68 from $2.32 and maintained its “buy” rating.
According to DBS Vickers, Cosco Corp could benefit from the restructuring of its parent Cosco Group, which may inject two of its shipbuilding assets into the Singapore-listed unit.
But Cosco Corp said in a filing to the Singapore Exchange on Thursday that it is not in talks with any party for an asset injection.
Phillip Securities said that despite Cosco Corp’s announcement, there is a possibility of restructuring that will benefit Cosco Corp because the firm will be bigger in size and gain a better position to compete with other shipyards globally.
The time is also appropriate as Cosco Corp has been reporting better quarterly financial results in its 2010 fiscal year, on top of winning contracts worth $2.7 billion in 2010 for dry bulk vessels and oil rigs, the brokerage added.
“We expect Cosco to win new orders of $3.8 billion in 2011. At the same, it has been working to reduce the time required to build new vessels, which should improve its gross profit margin,” Phillip said in a report.
However, the brokerage cautioned that Cosco Corp faces the problem of an appreciation of the yuan against the US Dollar as most of its contracts are in USD, adding that labour and steel costs have also increased.
At 09:02 a.m., Cosco Corp shares were up 0.4% at $2.34 on a volume of 205,000 shares.
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