Cosco has announced a rash of new order cancellations, this time more severe – the latest round comes from related companies. China Ocean Shipping and related companies have rescheduled the delivery of 3 57,000 dwt bulk carriers and outright cancelled 8 bulk carriers. The total value of the cancelled orders is S$298.7m, or about 5% of its total bulk carrier orderbook.
Cosco says that the three rescheduled vessels will be delivered between August 2009 and October 2009 instead of the planned delivery of between June and December 2008. Noting that the time of the original delivery has is already way past, we find it discomforting that Cosco had not made indication of this rescheduling prior to this. Cosco says that the buyers are not pursuing late delivery claims. As for the cancellations, Cosco will refund the deposits paid for the ships.
Prior to this cancellation, interested parties transactions were worth S$579.8m. The cancellation effectively halves that exposure. We estimate Cosco’s orderbook at around US$6.5b Last week, Cosco also announced that it will delay the delivery of 8 bulk carriers (two 79,500 dwt and six 92,500 dwt bulk carriers) to two European ship owners by between 4-9 months.
We had been expecting even more delays and/or cancellations for Cosco, given the difficult market conditions for bulk carriers; however, these latest cancellations have exceeded our assumptions. While Cosco says that the latest cancellations are not expected to have a significant impact to earnings in 2009, they will surely be felt from FY10 onwards.
We are therefore cutting our net profit forecast for FY10 by 40% and FY11 by 50%, to S$154.3m and S$141.5m respectively. We are also factoring lower margins from cost overruns, which see our FY09 forecast cut by a further 28% to S$185.4m. With earnings expected to be volatile, we had pegged fair value at 1.5x price-to-book, or S$0.81, which remains unchanged. Our SELL recommendation is also maintained.
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CoscoCorp
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Alligator
Veteran |
17-Jul-2009 17:00
Yells: "learning from past " |
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i bot also, against all the SELL reports. similar to NOL.. |
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maxcty
Master |
17-Jul-2009 16:40
Yells: "always a learning day for me in trading" |
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good catch
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freeme
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17-Jul-2009 16:35
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bot this awhile ago.. jus in time for the up.. | ||||
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rodney301
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17-Jul-2009 10:06
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From Bloomberg: link: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6KLkSJ2muOA By Wendy Leung and Kyunghee Park July 16 (Bloomberg) -- China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, canceled a $299 million order for eight vessels as the global recession and overcapacity saps rates. The shipping line will also delay delivery of three other vessels to be built by affiliate Cosco Corp. Singapore Ltd., according to statements last night from the companies, both members of China’s largest shipping group. Cosco Singapore fell the most in more than a month in the city-state. China Cosco Chairman Wei Jiafu said in April that the company planned to delay or cancel new vessels after China’s slowing demand for iron ore and rising overcapacity in the global fleet caused plunging rates and a first-quarter loss. The move raises Cosco Singapore’s cancellations since October to at least 13 and increases its number of delays to at least 29. The three delayed China Cosco vessels, previously due last year, will now be delivered by the end of October, Cosco Singapore said. The postponed and canceled vessels all have a capacity of 57,000 deadweight tons. The shipyard said on July 10 it had received requests from two European customers to delay deliveries of eight bulk carriers. Its order book totaled $7 billion at the end of March with deliveries stretching into the first half of 2012, according to a May 7 statement. The shipbuilder fell 4.9 percent to close at S$1.16. The company has gained 22 percent this year. China Cosco dropped 1.6 percent in Hong Kong trading to HK$9.53. It’s risen 77 percent this year. Rates Slump Shipping lines have postponed or canceled vessels because of a drop in rates. The Baltic Dry Index, which tracks commodity-cargo fees, has plunged 63 percent over the past year. Shipyards in China, the world’s No. 2 shipbuilding nation, had 152 orders axed in the eight months to May and may face more cancellations, the China Association of Shipbuilding Industry said on July 6. Worldwide, shipyards have orders for bulk vessels with a combined capacity equal to 66 percent of the existing global fleet, according to data compiled by Bloomberg. China Cosco had a fleet of 443 dry-bulk vessel at the end of December, with another 58 on order, according to an April 22 statement. It also operated 141 container vessels and had a backlog for 59 more. The company was attempting to delay three of nine new container ships due to arrive this year to 2010, it said at the time. Cosco Singapore operates shipyards in the Chinese cities of Dalian, Nantong, Shanghai, Zhoushan and Guangzhou. It began receiving orders to build bulk carriers in January 2007 after acquiring Cosco Shipyard Group from parent China Ocean Shipping (Group) Co. two years earlier. It delivered its first vessel in April. |
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yipyip
Master |
17-Jul-2009 10:03
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Cosco Corporation Family Ties Broken KIM ENG 16/Jul/2009: Slashing forecasts, maintain SELL We are therefore cutting our net profit forecast for FY10 by 40% and FY11 by 50%, to S$154.3m and S$141.5m respectively. We are also factoring lower margins from cost overruns, which see our FY09 forecast cut by a further 28% to S$185.4m. With earnings expected to be volatile, we had pegged fair value at 1.5x price-to-book, or S$0.81, which remains unchanged. Our SELL recommendation is also maintained. 8 ships cancelled by related companies Cosco has announced a rash of new order cancellations, this time more severe – the latest round comes from related companies. China Ocean Shipping and related companies have rescheduled the delivery of 3 57,000 dwt bulk carriers and outright cancelled 8 bulk carriers. The total value of the cancelled orders is S$298.7m, or about 5% of its total bulk carrier orderbook. In the dark about latest rescheduling Cosco says that the three rescheduled vessels will be delivered between August 2009 and October 2009 instead of the planned delivery of between June and December 2008. Noting that the time of the original delivery has is already way past, we find it discomforting that Cosco had not made indication of this rescheduling prior to this. Cosco says that the buyers are not pursuing late delivery claims. As for the cancellations, Cosco will refund the deposits paid for the ships. The floodgate for bad news stays open Prior to this cancellation, interested parties transactions were worth S$579.8m. The cancellation effectively halves that exposure. We estimate Cosco’s orderbook at around US$6.5b Last week, Cosco also announced that it will delay the delivery of 8 bulk carriers (two 79,500 dwt and six 92,500 dwt bulk carriers) to two European ship owners by between 4-9 months. Cancellations exceeding our already negative assumptions We had been expecting even more delays and/or cancellations for Cosco, given the difficult market conditions for bulk carriers; however, these latest cancellations have exceeded our assumptions. While Cosco says that the latest cancellations are not expected to have a significant impact to earnings in 2009, they will surely be felt from FY10 onwards. |
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yipyip
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17-Jul-2009 09:56
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AmResearch Sdn Bhd: 16/Jul/09 We maintain our BUY call on Cosco with fair value of S$1.50/share, based on a FY10F PE of 17x, which implies a 15% discount to Cosco’s three-year average PE of 20x. Cosco Corp (S) Ltd (Cosco) has cancelled and rescheduled shipbuilding contracts with related companies - Qingdao Ocean Shipping Co, Ltd. (Qingdao) and Cosco (Hong Kong) Shipping Co, Ltd (Cosco HK). This involves rescheduling delivery of three units of bulk carriers of 57,000 DWT (deadweight tonne) each and cancelling US$299mil in contracts to construct eight units of bulk carriers of 57,000 DWT each. Quigdao and Cosco HK are subsidiaries of China Cosco Holdings Company Limited, which has a 53% stake in Cosco. Postponement of the delivery for the three bulk carriers does not surprise since construction had already been delayed by the global financial crisis. These contracts, entered into on 6 December 2006, have been postponed by up to a year from 20 June 2008-10 December 2008 to 15 August 2009-31 October 2009. Construction has not commenced for the eight vessels being cancelled. We estimate that Cosco’s total order cancellations has risen from US$200mil to US$500mil - since late last year. For orders from Cosco’s related companies, outstanding contracts have fallen from S$1bil to S$580mil. We estimate that Cosco’s outstanding order book has fallen from S$7bil as at 30 June 2009 to S$6.6bil, down from an all-time high of S$8.1bil as at end-3QFY08. Assuming new orders of S$500mil-S$1bil for FY09F-FY11F mainly from conversion jobs and marine engineering projects, we estimate that the group’s order book could still slide further to S$5.9bil by FY11F due to contract depletion. As worrying as the depleting locked-in sales may be, we highlight that Cosco’s order book still represents a comfortable 2.6x FY09F revenue for its shipbuilding, repair & marine engineering division. Note that bulk carrier jobs, which account for 20%-30% of Cosco order book could face further cancellation. These cancellation of bulk carrier projects would not be surprising, as highlighted in our Re-initiation report dated 2 July 2009. Even though Cosco currently enjoys a premium to other oil & gas stocks such as Keppel Corp, we believe that there is further upside to the stock given that current valuations are still at a 30% discount to its three-year average forward rolling PE of 20x. Given the recovery in commodity prices, we expect further upside to Cosco’s share price, which should lead to a narrowing of the discount to historical valuations. |
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rodney301
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17-Jul-2009 09:33
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well-said. counter is moving down right now. i think its due to heavy shorting which showed people unloading massive volumes. may cover back later at 4.30pm. 
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el7888
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17-Jul-2009 09:29
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rodney301
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17-Jul-2009 08:56
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well, I think that I prefer to stick with valuations from Kim Eng. There is another research on Reuters website by 17 agents. The link is as below: http://www.reuters.com/finance/stocks/recommendations?symbol=COSC.SI Cosco has got a superb underperform and sell call. The average rating is 4.24 (which is a sell call, samller number is a buy call). Out of 17 researchers, only 1 gave a buy call. 9 underperform calls and 7 sell calls. This reinforced the rating by Kim Eng so I will perhaps go in when the price goes down to perhaps less than a dollar. But I totally agree that its worth to hold for long term. But who doesn't want to buy at a discount???
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equator2010
Senior |
17-Jul-2009 02:40
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can you elaborate or support your call with solid reasons ?
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Huhushares
Member |
17-Jul-2009 01:30
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The contract have terminated, the company whose brought the ship should have penalty fines for terminated the contract. Therefore coscocorp still earn money. For short period of times this counter still good. For today dropping due to market panic factor. But i think tmr will be rise back asap liao..... Sian i thought no one will panic on de cancelation of the vessel therefore i go in the morning....i should wait for the price 1.16 in the afternoon..........wasted cannot buy in cheaper price | ||||
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watchlist
Member |
17-Jul-2009 00:41
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Please stay out of this counter. It is moving into very rough water.... | ||||
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dealer0168
Elite |
16-Jul-2009 23:06
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Cosco is a good stock to keep (i agreed with peg li). But from the chart, currently can't see any strong uptrend signal. Thursday rally is due to market sentiments. Monitor for a few more days more...... if intend to vest on this one. May pick it up at a better price. A good stock to keep. But 0.81 emm.....may not get it, bc in this world to be frank nothing is confirmed .....anything still can happen..................
(My opinion)
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amilytan
Member |
16-Jul-2009 22:56
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Yup, agree that this counter no longer in support as bad news coming in...maybe target price as 0.81 will hit within a month | ||||
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equator2010
Senior |
16-Jul-2009 22:52
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Perhaps target low so they can load up more in anticipation of share price rise later ?
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tanglinboy
Elite |
16-Jul-2009 21:56
Yells: "hello!" |
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The recent price fall already took the news into account already lah. | ||||
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ronleech
Master |
16-Jul-2009 21:46
Yells: "Believe in yourself. Ride with the waves......" |
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my broker TP only $0.81..... 8 ships cancelled by related companies Cosco has announced a rash of new order cancellations, this time more severe 每 the latest round comes from related companies. China Ocean Shipping and related companies have rescheduled the delivery of 3 57,000 dwt bulk carriers and outright cancelled 8 bulk carriers. The total value of the cancelled orders is S$298.7m, or about 5% of its total bulk carrier orderbook. Slashing forecasts, maintain SELL We are therefore cutting our net profit forecast for FY10 by 40% and FY11 by 50%, to S$154.3m and S$141.5m respectively. We are also factoring lower margins from cost overruns, which see our FY09 forecast cut by a further 28% to S$185.4m. With earnings expected to be volatile, we had pegged fair value at 1.5x price-to-book, or S$0.81, which remains unchanged. Our SELL recommendation is also maintained. |
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Peg_li
Master |
16-Jul-2009 21:28
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I think you are working for kim eng.pls see below from another agent. which one shall we listen to? AM Research [呼吁买入]
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Peg_li
Master |
16-Jul-2009 21:14
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Hi, Which broker agent are you working for?
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el7888
Veteran |
16-Jul-2009 20:58
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Cosco - Family Ties BrokenCosco has announced a rash of new order cancellations, this time more severe – the latest round comes from related companies. China Ocean Shipping and related companies have rescheduled the delivery of 3 57,000 dwt bulk carriers and outright cancelled 8 bulk carriers. The total value of the cancelled orders is S$298.7m, or about 5% of its total bulk carrier orderbook.
Cosco says that the three rescheduled vessels will be delivered between August 2009 and October 2009 instead of the planned delivery of between June and December 2008. Noting that the time of the original delivery has is already way past, we find it discomforting that Cosco had not made indication of this rescheduling prior to this. Cosco says that the buyers are not pursuing late delivery claims. As for the cancellations, Cosco will refund the deposits paid for the ships. Prior to this cancellation, interested parties transactions were worth S$579.8m. The cancellation effectively halves that exposure. We estimate Cosco’s orderbook at around US$6.5b Last week, Cosco also announced that it will delay the delivery of 8 bulk carriers (two 79,500 dwt and six 92,500 dwt bulk carriers) to two European ship owners by between 4-9 months. We had been expecting even more delays and/or cancellations for Cosco, given the difficult market conditions for bulk carriers; however, these latest cancellations have exceeded our assumptions. While Cosco says that the latest cancellations are not expected to have a significant impact to earnings in 2009, they will surely be felt from FY10 onwards. We are therefore cutting our net profit forecast for FY10 by 40% and FY11 by 50%, to S$154.3m and S$141.5m respectively. We are also factoring lower margins from cost overruns, which see our FY09 forecast cut by a further 28% to S$185.4m. With earnings expected to be volatile, we had pegged fair value at 1.5x price-to-book, or S$0.81, which remains unchanged. Our SELL recommendation is also maintained. |
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