Cosco Corporation (Bloomberg: COS SP | Reuters: COSC.SI)

BUY S$1.95, Price Target: S$2.86

Analyst:

janicechua@dbsvickers.com

HO Pei Hwa +65 6398 7968

peihwa@dbsvickers.comJanice CHUA +65 6398 7954

Secures two jackup orders from KS Energy

Source of all data: Company, DBS Vickers, Bloomberg

Orders for two jack-up from KS Energy. Cosco

announced over lunch that it has secured orders for two

units of jackup drilling rig worth US$360m in total from

KS Drilling Pte.Ltd, a subsidiary of KS Energy Limited.

The first rig is scheduled to be delivered in 3Q13 and

the second rig in 1Q14.

A vote of confidence. The jack-ups will be built at

Cosco Nantong, based on LeTOURNEAU WORKHORSE

Class design. Upon completion, these rigs will be one of

the world's deepest drilling rigs with drilling depth of up

to 35,000 ft, capable of operating in 400 feet water

depth and with accommodation for 150 persons

onboard. It features an offline stand building capability

to handle drill pipes efficiently and is equipped with a

capacity hook-load of 2 million pounds, boosting overall

rig performance and productivity. We see the award of

sophisticated rig orders as an accolade and vote of

confidence in Cosco's offshore capability.

YTD wins make up 67% of our assumption. This will

bring Cosco's YTD firm contract wins to US$637m.

Taking into account the LOIs of two cylindrical rigs from

Sevan (worth US$1.05bn), which we believe is 'almost'

in the bag, total order wins would amount to approx.

US$1.7bn, making up 67% of our order win

assumption of US$2.5bn.

More to come. As highlighted in our previous reports,

the latest wins are among the robust US$2bn contracts

in the pipeline. The new wins serve as a harbinger to

more offshore contracts for Cosco. Recent price

weakness presents an attractive entry point to buy into

Cosco ahead of contract wins. No change to our

estimates, Buy recommendation and TP of $2.86.

DBS Group Research . Equity 26 May 2011

Singapore

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R e la t iv e In d e x

C o sco C o rp o ra t io n (LH S ) R e la t iv e S T I IN D E X (R H S )

Forecasts and Valuation

FY Dec (S$ m) 2009A 2010A 2011F 2012F

Turnover 2,899 3,861 4,732 5,865

EBITDA 341 552 667 757

Pre-tax Profit 179 402 470 558

Net Profit 110 249 252 303

Net Pft (Pre Ex.) 110 221 252 303

EPS (S cts) 4.9 11.1 11.3 13.5

EPS Pre Ex. (S cts) 4.9 9.9 11.3 13.5

EPS Gth Pre Ex (%) (64) 101 14 20

Diluted EPS (S cts) 4.9 11.1 11.3 13.5

Net DPS (S cts) 3.0 4.0 5.6 6.8

BV Per Share (S cts) 48.4 53.5 60.8 68.7

PE (X) 39.7 17.5 17.3 14.4

PE Pre Ex. (X) 39.7 19.8 17.3 14.4

P/Cash Flow (X) 16.6 10.9 10.4 9.1

EV/EBITDA (X) 13.1 9.2 6.8 5.6

Net Div Yield (%) 1.5 2.1 2.9 3.5

P/Book Value (X) 4.0 3.6 3.2 2.8

Net Debt/Equity (X) CASH 0.1 CASH CASH

ROAE (%) 9.9 21.8 19.7 20.9

Earnings Rev (%): - -

Consensus EPS (S cts): 11.6 13.4

Other Broker Recs: B: 5 S: 6 H: 4

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Cosco Corporation

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