Soilbuild Business Space REIT issued 111.8 mn new shares at S$0.805 apiece. Net proceed of S$88.4 mn is intended to help fund the proposed acquisition of 72 Loyang Way.
Cosco Corporation (Singapore) Limited secured a vessel conversion contract worth US$95 mn. It is scheduled for delivery in
4Q2016.
United Envirotech Ltd. agreed to invest US$30 mn to build and operate an industrial park wastewater treatment plant in Jiangsu, China.
Viva Industrial Trust's 1QFY15 DPS came in 8.6% higher YoY at 1.87 S-cents, with better performance attributable to new additions to its portfolio and higher rental contributions.
Creative recorded a higher net loss YoY of US$11.7m for 3QFY15, mainly due to foreign exchange loss and impairment loss on investments.
Elec & Eltek International is expected to record a loss for 1QFY15 due to slower order intake and a charge for potential quality claims from customers.
F J Benjamin Holdings' subsidiary entered into an agreement for the sale of its four property units in Hong Kong for HK$86.3m (S$14.5m), as the group intends to divest its non-core assets.
Showing posts with label Cosco Corp (F83). Show all posts
Showing posts with label Cosco Corp (F83). Show all posts
Apr 23, 2015
Nov 4, 2014
COSCO Corp no turnaround in sight
3Q14 results in line
COSCO Corp reported a 17% YoY rise in revenue to S$1.16b and a 69% increase in net profit to S$7.1m in 3Q14, such that 9M14 net profit accounted for 76% and 69% of ours and the street’s estimates, respectively. On a YoY basis, profit was higher due to lower provisions on construction contracts (S$10.6m in 3Q14 vs S$33.9m in 3Q13); a less aggressive depreciation policy also aided bottom-line. However, gross profit margin dropped significantly from 7.4% in 3Q13 to 4.9% in 3Q14 with the execution of lower margin contracts.
Three offshore projects already cancelled or at risk of cancellation
COSCO recently announced that delivery for the Sevan 650 drilling unit has been extended to up to 36 months from Oct 2014; 2Q14 was the original delivery date. For the deepwater drillship contract (~US$630m) that was terminated by Dalian Deepwater Development, arbitration in London is still ongoing and the company is unable to quantify the financial impact of the project. As for the Octabuoy hull and topside module (~US$240m), the contract has been terminated, and COSCO Nantong has the right to either complete or not complete the project as it deems fit, and to sell the project at a public or private sale.
Weak execution and deteriorating balance sheet in a slowing market
As at 30 Sep 2014, the group’s order book stood at US$8.9b, with progressive deliveries up to
Aug 4, 2014
COSCO Corp net gearing continues to rise
2Q14 results within expectations
COSCO Corp reported a 29% YoY rise in revenue to S$1.15b and a 19% increase in net profit to S$14.3m in 2Q14, such that 1H14 net profit accounted for 58% and 52% of ours and the street’s estimates, respectively. We would not read too much into quarterly earnings, though, given the potential for huge swings in earnings due to the group’s current stage in the offshore learning curve – e.g. 1H13 net profit accounted for 70% of FY13’s full year earnings. A S$12.9m allowance was made in 2Q14 for inventory write-downs, but on a more positive note, there were no provisions made for construction contracts in the quarter.
Updates on deepwater drillship and Octabuoy
For the deepwater drillship contract that was terminated by Dalian Deepwater Development, arbitration in London is still ongoing and the company is unable to quantify the financial impact of the project. As for the Octabuoy hull and topside module, the contract has been terminated, and COSCO Nantong has the right to either complete or not complete the project as it deems fit, and to sell the project at a public or private sale.
Not upbeat about newbuilds in dry bulk
In the dry bulk shipping segment, management believes that the group may continue to face pressure in newbuilds. Due to new tonnage accumulation in the past years, any possible market recovery “will be a slow process with uncertainty”.
Net gearing continues to rise
As at 30 Jun 2014, the group’s order book stood at US$8.1b, with progressive deliveries up to 2016. However, margins are likely to remain low due and focus should remain on execution. Management continues to expect “difficult and challenging” business and operating conditions this year, which does not augur well for a company with a net gearing of 1.2x (vs. 0.5x in 2Q12 and 0.9x in 2Q13) and is still scaling the offshore learning curve. Maintain SELL with S$0.61 fair value estimate.
May 2, 2014
COSCO Corp still difficult and challenging
Decent 1Q14 results helped by accounting change
COSCO Corp reported a set of in-line results, with a 42% YoY rise in revenue to S$1.04b and a 30% increase in net profit to S$12.6m in 1Q14, accounting for 27% and 27.9% of our full year estimates, respectively. Excluding one-offs such as a S$4.8m fair value loss on forward currency contracts and a S$2.98m reversal of expected losses on construction contracts, core net profit looked decent at S$14.4m. We note, however, that a revision in the estimated useful lives of certain assets had led to an increase of about S$9.39m in pre-tax profit by way of a decrease in depreciation charge in the quarter.
Hoping to sell deepwater drillship soon
For the deepwater drillship contract that was terminated by Dalian Deepwater Development, arbitration in London is still ongoing. We understand that the contract was cancelled due to a delay in delivery of the vessel (now completed and sitting on COSCO‟s books at about US$630m), and the first instalment of US$110m has been refunded to the ship owner, along with interest payment of
May 13, 2013
Cosco Corp weak 1Q13 on lower other income
Deutsche Bank
1Q13 net income down 65% yoy, challenging conditions remain
COS’s 1Q13 sales declined 25% yoy to S$733m, while PATMI fell 65% yoy to S$9.7m. The weak results were due largely to a steep decline in other income, where currency exchange swung from a profit of S$15m in 1Q12 to a loss of S$4m in 1Q13, and scrap material sales declined 54% yoy to S$7.6m. Its gross margin, however, rose from 10.1% in 1Q12 to 10.7% in 1Q13, due to higher profits from marine engineering projects. We lower FY13-15E earnings by about 10-14% and our target price from S$0.95 to S$0.90. COS’s current valuations appear fair, in our view. Maintain Hold.
Offshore improving but new products could affect margins
Although COS’s execution has improved in offshore engineering, as shown by a reversal of expected losses on construction contracts (loss of S$13.8m in 1Q12 to slight profitability in 1Q13), management warns that the execution of new product types could lead to higher costs in future. COS’s YTD wins total US$254m and it had an order book worth US$6.4bn as at Mar-13.
Weak shipbuilding fundamentals
COS expects the challenging operating conditions to continue with tight credit conditions, increases in raw material prices and wages, along with rising competition in offshore & marine. Weak sector fundamentals have led to sharp declines in new orders and low vessel prices. As yards in China deliver the remaining orders they have in 2013, the worry should be on 2014 and beyond as Clarkson data suggest a sharp decline in deliveries for bulk carriers and containerships from 2013 to 2014. COS is targeting new orders worth
1Q13 net income down 65% yoy, challenging conditions remain
COS’s 1Q13 sales declined 25% yoy to S$733m, while PATMI fell 65% yoy to S$9.7m. The weak results were due largely to a steep decline in other income, where currency exchange swung from a profit of S$15m in 1Q12 to a loss of S$4m in 1Q13, and scrap material sales declined 54% yoy to S$7.6m. Its gross margin, however, rose from 10.1% in 1Q12 to 10.7% in 1Q13, due to higher profits from marine engineering projects. We lower FY13-15E earnings by about 10-14% and our target price from S$0.95 to S$0.90. COS’s current valuations appear fair, in our view. Maintain Hold.
Offshore improving but new products could affect margins
Although COS’s execution has improved in offshore engineering, as shown by a reversal of expected losses on construction contracts (loss of S$13.8m in 1Q12 to slight profitability in 1Q13), management warns that the execution of new product types could lead to higher costs in future. COS’s YTD wins total US$254m and it had an order book worth US$6.4bn as at Mar-13.
Weak shipbuilding fundamentals
COS expects the challenging operating conditions to continue with tight credit conditions, increases in raw material prices and wages, along with rising competition in offshore & marine. Weak sector fundamentals have led to sharp declines in new orders and low vessel prices. As yards in China deliver the remaining orders they have in 2013, the worry should be on 2014 and beyond as Clarkson data suggest a sharp decline in deliveries for bulk carriers and containerships from 2013 to 2014. COS is targeting new orders worth
Mar 15, 2012
Cosco’s FY11 net profit decline of 44% to $139.7m
Target price - S$0.72
What’s the fuss all about? Cosco simply looks overvalued. While the market has grown more optimistic about the marine sector on account of a few key contract wins by the established offshore yards, Cosco still does not have the credentials or the fundamentals to ride those coattails. Its recently-reported FY11 financials also do not inspire confidence. We maintain our Sell recommendation on Cosco and maintain our target price at $0.72.
Numbers are down and will stay down. While Cosco’s FY11 net profit decline of 44% to $139.7m despite an 8% pickup in revenue came as no particular surprise to the market, its share price has been resilient and valuations have stayed rich. However, we believe that market optimism on the stock is misplaced, as we see no recovery to its earnings based on its current orderbook and our projection of new order wins. Core margins remain weak, hovering at an abysmal 2.8%.
Nov 3, 2011
Cosco disappointing Quarter-Expected Losses
PhillipCapital - target price of $0.82
3Q11 Results Cosco Corp reported 3Q11 revenue and PATMI of S$970 mil (+2% Y-o-Y) and $32 mil (-42% Y-o-Y). PATMI fell sharply mainly due to
1) lower profits from dry bulk shipping
2) lower margins from shipyard ops (expected losses on construction contracts)
3) higher selling expenses (distribution expense) in a difficult operating environment.
Another Disappointing Quarter-Expected Losses Escalates
Cosco 3Q11 results came in below expectations (Actual PATMI: S$32 mil vs. PSR PATMI estimate: S$39 million). The main culprit was higher expected losses on construction contracts of S$47 mil. We understand from management that the bulk of these expected losses originate from its offshore projects where it experienced cost overruns. The expected losses also provides for penalties stemming from a probable late delivery of one of its vessels currently under construction. The company also mentioned that they might have to recognize further losses in subsequent quarters if they experience further cost overruns or negotiate new shipbuilding/offshore projects at a loss, which we think is highly possible given
1) as it embark on the construction of model/class of rigs not built previously (Letourneau jackups, DP3 drillships) and
2) current shipbuilding market remains weak with little signs of improvement (current rates on construction of bulk carriers not profitable). Hellanic Shipping News quoted NDRC saying on Tuesday that 30% of China’s 1,526 shipbuilding enterprises received no new orders in September, forcing some to shut or stop production.
Shipbuilding and offshore margins remain weak
Management guided that gross margins for shipbuilding in 3Q11 lies somewhere between 8 to 9%. The company is working on improving its delivery lead-time as well as efficiencies in the construction of its dry bulk carriers but conceded that there may be a limit to it. Going forward, current margins might not be sustainable due to lower value of shipbuilding contracts in the market now. Cosco currently has enough shipbuilding contracts to keep its yard busy till 2H2012.We note that Cosco has not won any order for dry bulk carrier construction since December last year and if the shipbuilding market does not improve, Cosco may have to accept shipbuilding orders at a loss to cover its fixed costs.
For its offshore projects, management guided that gross margins for its offshore projects lies near the region of 5% and added that it is “ not so promising” as the company is mindful of the potential costs of scaling the “learning curve” when executing its offshore orderbook.
No signs of order cancellations yet
Other than the order cancellation of a dry bulk carrier in March, the company has not yet received any request for order cancellation or postponed delivery. The company also guided that about half of its current shipbuilding orderbook comes from European customers, of which Greek customers make up the highest proportion of its European customers with the rest made up of Netherlands, UK, Belgium and Norwegian customers.
Valuation:
We downgrade Cosco from Hold to Sell with a revised target price of $0.82 as we lower our FY11e and FY12e EPS to 6cts and 5.8 cts from 7.2 cts and 6.6 cts previously, taking into account possible losses from its marine engineering projects as well as a weak dry bulk market that is expected to persist at least till 2012. Our target price of $0.82 is based on 14x FY12e EPS, in-line with mid-cycle valuations. SELL.
CITI - - target price of $0.82
COS’s disappointing 3Q11 PATMI of S$32mn (flat QoQ; -42% YoY) came in >30% below both our and consensus expectations. Excluding strong forex gains of S$19.5mn during the quarter (vs 3Q10: S$2.1mn), we estimate earnings at a paltry S$17mn. The dismal set of results was underpinned by i) renewed execution problems on several offshore projects (3Q11 provisions of S$47.4mn; +72% YoY); and ii) lower turnover from its dry bulk shipping division (-55% YoY; ave BDI in 3Q11:1533 vs 3Q10: 2352).
Although revenue from bulk shipping has declined, it remains profitable. Contributions from ship repair and offshore conversion remain steady but shipbuilding margins continue to face headwinds.
Management is upbeat on offshore orderbook prospects and believes 2012 order wins can be comparable vs 2011. Enquiry levels for rigs/fpso remain healthy and impact from on-going Europe crisis has not completely dampened demand. Potential contract wins in the near future include Heavy Lift Vessels from Sapura Crest worth more than US$200mn. On the other hand, ship building is expected to remain poor and prices have started to decline by ~5% over the past month. At this rate, Cosco may turn loss making at the ship building level
YTD the group has secured order wins of ~US$2bn (inclusive of two jackups and two semisubs). Current order backlog stands at US$6.4bn, with deliveries into 1H14. Rig orders now account for ~55% of backlog, while ships contribute ~45%, with the remainder arising from fpso conversion jobs.
Maintain Sell. We reiterate our view that COS’s diverse offshore product mix (jackups, tender rigs, drillship, semisubs) continually presents fresh execution challenges to the group in the foreseeable future. Recurring provisions necessary to scale the learning curve is likely to result in earnings volatility in coming quarters, which we believe will hamstring any prospects of a strong sustained rally for the stock.
Deutsche Bank - TP 1.10 HOLD
Target price based on 1.8x FY12E P/B; Hold We peg COS’s target multiple at 1.8x P/B (FY12E), which derives a target price of S$1.10. Our target price implies 15x FY12E PER, below its 2005-11 average of 20.2x but above its 2009 trough PER of 10.4x. Upside risks: a decline in steel prices, RMB depreciation,easing credit markets. Downside risks: a sustained fall in the BDI, a slowdown in offshore orders, execution issues, and a tightening of credit markets
Upside risks
- Steel accounts for about 15-20% of Cosco's costs. A ship plate price decline would positively affect the group's earnings.
- Most of Cosco's shipbuilding orders are in dry bulk vessels. The group's earnings could benefit if there is any unexpected increase in demand for bulk carriers.
- Cosco has experienced execution problems in vessel construction over the past few years. Any better-than-expected project execution would be positive for profit margins.
- New orders for Cosco are dependent on its customers' ability to obtain financing. If the credit markets improve significantly, this could have a positive impact on new orders.
Downside risks
- Most of COS's orders are in dry bulk vessels. If the BDI experiences a sharp and sustained fall, this may affect the group's new order prospects.
- The group has secured several offshore-related orders over the past year. COS's earnings would be affected if customer demand declines in this area. Cosco is targeting an improvement in execution in the coming months. Any further execution issues would be negative for the group's margins.
- Any unexpected worsening of the credit markets would have a negative impact on the group's new orders.
3Q11 Results Cosco Corp reported 3Q11 revenue and PATMI of S$970 mil (+2% Y-o-Y) and $32 mil (-42% Y-o-Y). PATMI fell sharply mainly due to
1) lower profits from dry bulk shipping
2) lower margins from shipyard ops (expected losses on construction contracts)
3) higher selling expenses (distribution expense) in a difficult operating environment.
Another Disappointing Quarter-Expected Losses Escalates
Cosco 3Q11 results came in below expectations (Actual PATMI: S$32 mil vs. PSR PATMI estimate: S$39 million). The main culprit was higher expected losses on construction contracts of S$47 mil. We understand from management that the bulk of these expected losses originate from its offshore projects where it experienced cost overruns. The expected losses also provides for penalties stemming from a probable late delivery of one of its vessels currently under construction. The company also mentioned that they might have to recognize further losses in subsequent quarters if they experience further cost overruns or negotiate new shipbuilding/offshore projects at a loss, which we think is highly possible given
1) as it embark on the construction of model/class of rigs not built previously (Letourneau jackups, DP3 drillships) and
2) current shipbuilding market remains weak with little signs of improvement (current rates on construction of bulk carriers not profitable). Hellanic Shipping News quoted NDRC saying on Tuesday that 30% of China’s 1,526 shipbuilding enterprises received no new orders in September, forcing some to shut or stop production.
Shipbuilding and offshore margins remain weak
Management guided that gross margins for shipbuilding in 3Q11 lies somewhere between 8 to 9%. The company is working on improving its delivery lead-time as well as efficiencies in the construction of its dry bulk carriers but conceded that there may be a limit to it. Going forward, current margins might not be sustainable due to lower value of shipbuilding contracts in the market now. Cosco currently has enough shipbuilding contracts to keep its yard busy till 2H2012.We note that Cosco has not won any order for dry bulk carrier construction since December last year and if the shipbuilding market does not improve, Cosco may have to accept shipbuilding orders at a loss to cover its fixed costs.
For its offshore projects, management guided that gross margins for its offshore projects lies near the region of 5% and added that it is “ not so promising” as the company is mindful of the potential costs of scaling the “learning curve” when executing its offshore orderbook.
No signs of order cancellations yet
Other than the order cancellation of a dry bulk carrier in March, the company has not yet received any request for order cancellation or postponed delivery. The company also guided that about half of its current shipbuilding orderbook comes from European customers, of which Greek customers make up the highest proportion of its European customers with the rest made up of Netherlands, UK, Belgium and Norwegian customers.
Valuation:
We downgrade Cosco from Hold to Sell with a revised target price of $0.82 as we lower our FY11e and FY12e EPS to 6cts and 5.8 cts from 7.2 cts and 6.6 cts previously, taking into account possible losses from its marine engineering projects as well as a weak dry bulk market that is expected to persist at least till 2012. Our target price of $0.82 is based on 14x FY12e EPS, in-line with mid-cycle valuations. SELL.
CITI - - target price of $0.82
COS’s disappointing 3Q11 PATMI of S$32mn (flat QoQ; -42% YoY) came in >30% below both our and consensus expectations. Excluding strong forex gains of S$19.5mn during the quarter (vs 3Q10: S$2.1mn), we estimate earnings at a paltry S$17mn. The dismal set of results was underpinned by i) renewed execution problems on several offshore projects (3Q11 provisions of S$47.4mn; +72% YoY); and ii) lower turnover from its dry bulk shipping division (-55% YoY; ave BDI in 3Q11:1533 vs 3Q10: 2352).
Although revenue from bulk shipping has declined, it remains profitable. Contributions from ship repair and offshore conversion remain steady but shipbuilding margins continue to face headwinds.
Management is upbeat on offshore orderbook prospects and believes 2012 order wins can be comparable vs 2011. Enquiry levels for rigs/fpso remain healthy and impact from on-going Europe crisis has not completely dampened demand. Potential contract wins in the near future include Heavy Lift Vessels from Sapura Crest worth more than US$200mn. On the other hand, ship building is expected to remain poor and prices have started to decline by ~5% over the past month. At this rate, Cosco may turn loss making at the ship building level
YTD the group has secured order wins of ~US$2bn (inclusive of two jackups and two semisubs). Current order backlog stands at US$6.4bn, with deliveries into 1H14. Rig orders now account for ~55% of backlog, while ships contribute ~45%, with the remainder arising from fpso conversion jobs.
Maintain Sell. We reiterate our view that COS’s diverse offshore product mix (jackups, tender rigs, drillship, semisubs) continually presents fresh execution challenges to the group in the foreseeable future. Recurring provisions necessary to scale the learning curve is likely to result in earnings volatility in coming quarters, which we believe will hamstring any prospects of a strong sustained rally for the stock.
Deutsche Bank - TP 1.10 HOLD
Target price based on 1.8x FY12E P/B; Hold We peg COS’s target multiple at 1.8x P/B (FY12E), which derives a target price of S$1.10. Our target price implies 15x FY12E PER, below its 2005-11 average of 20.2x but above its 2009 trough PER of 10.4x. Upside risks: a decline in steel prices, RMB depreciation,easing credit markets. Downside risks: a sustained fall in the BDI, a slowdown in offshore orders, execution issues, and a tightening of credit markets
Upside risks
- Steel accounts for about 15-20% of Cosco's costs. A ship plate price decline would positively affect the group's earnings.
- Most of Cosco's shipbuilding orders are in dry bulk vessels. The group's earnings could benefit if there is any unexpected increase in demand for bulk carriers.
- Cosco has experienced execution problems in vessel construction over the past few years. Any better-than-expected project execution would be positive for profit margins.
- New orders for Cosco are dependent on its customers' ability to obtain financing. If the credit markets improve significantly, this could have a positive impact on new orders.
Downside risks
- Most of COS's orders are in dry bulk vessels. If the BDI experiences a sharp and sustained fall, this may affect the group's new order prospects.
- The group has secured several offshore-related orders over the past year. COS's earnings would be affected if customer demand declines in this area. Cosco is targeting an improvement in execution in the coming months. Any further execution issues would be negative for the group's margins.
- Any unexpected worsening of the credit markets would have a negative impact on the group's new orders.
Oct 18, 2011
Cosco Corp prices to retest the S$0.94 and S$0.855
CIMB
Cosco Corp (COS SP; S$1.005; SELL) - We expect prices to retest the S$0.94 and S$0.855 again the in coming days.
Cosco Corp (COS SP; S$1.005; SELL) - We expect prices to retest the S$0.94 and S$0.855 again the in coming days.
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