Company Name: COSCO CORPORATION (S) LTD
| Research House: OCBC | Price Call: HOLD | Target Price: 0.98 |
Shares of Cosco Corp (Singapore) declined after the Chinese shipbuilder reported a 25% drop in quarterly net profit and warned that business and operating conditions for the rest of the year would remain challenging.
Brokers cut their forecasts on Cosco and the shares fell as much as 3.5% to $0.965, the lowest since mid-January, while the FT ST Mid Cap index lost 0.8%. As of Tuesday’s close, the stock had gained 14%, in line with the index.
“Shipbuilding, ship repair and conversion margins will continue to face downward pressure. Share price will likely remain in doldrums,” UOB Kay Hian said. It cut its price target to $0.90 from $0.93 and retained its sell rating.
The broker said Cosco is eyeing total new offshore contract wins of US$2 billion ($2.5 billion) for 2012, but the company is unlikely to meet its target of securing orders for 20-25 bulk carriers due to the current difficult shipping environment.
Out of 21 brokers tracking Cosco, 18 have a sell or strong sell, two have a hold and one has a strong buy rating.
OCBC Investment Research said more Chinese yards are taking on repair work to compensate for the lack of shipbuilding orders, resulting in very competitive pricing. It maintained its hold rating and $0.98 price target.
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