CIMB cuts Cosco Corp to Underperform, cuts target 53%

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

Research House: CIMB

Price Call: SELL

Target Price: 0.46

CIMB downgrades Cosco Corp. (F83.SG) to Underperform from Neutral after 1Q13 core profit accounted for only 10% of the house's full-year forecast, coming in well below expectations on negative operating leverage and lower other income.

CIMB cuts its target to $0.46 from $0.98 after lowering FY13-15 EPS forecasts by 50%-53% on lower scrap sales and margins.

"Despite the dismal outlook, we believe that Cosco, as a state-owned firm, could be forced to keep its workforce and yards intact to sustain employment rather than making the required cuts to improve operational leverage," CIMB says. "We see no reason to own the stock with its sharp earnings declines and premium valuations."

The stock is down 4.6% at $0.83.