SG: COSCO (S'pore)- Growing up pains

Stock Name: CoscoCorp
Company Name: COSCO CORPORATION (S) LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.98

COSCO CORP (S'PORE) 24 Apr 2012

GROWING UP PAINS - Strong headwinds from shipbuilding - Nascent offshore engineering segment - Margin pressure expected over near-term horizon COSCO Corporation (Singapore) Limited (COSCO) is one of the largest ship repair and shipbuilding yards in China. In recent years, it has made significant efforts to build up its offshore marine engineering capabilities such that the offshore segment accounts for >50% of new orders in FY2011. However, as it is relatively inexperienced in building drilling rigs and production facilities, the offshore segment could take a substantial period of time before it sees any significant productivity improvements. Besides, the group also faces strong headwinds in the shipping and shipbuilding industries. We apply an industry-average P/B multiple of 1.6x to COSCO and obtain a fair value estimate of S$0.98. Initiate with HOLD.