Brokers' Take

Cosco Corp, Jan 5 close: $1.23 (+1 cent)

5 January 2005
The Business Times

Kim Eng Securities, Dec 5

MANAGEMENT'S projections of a doubling in FY04 earnings in line with projections. Cosco's president Ji Hai Sheng has said in press reports that he expects the company's net income in 2004 to more than double. This is in line with our projections of a 152 per cent rise in net profits to $61.2 million.

Earnings for nine months more than doubled. Cosco had already reported a 284 per cent rise in net profits to $43 million for the nine months to September, 2004. For 3Q04, earnings rose 73 per cent to $12.1 million, despite a $6.4 million in provisions for the group's non-core property assets.

FY05/06 earnings boosted by CSG purchase. As mentioned in our earlier reports, with the recent approval of the group's purchase of a 51 per cent stake in Cosco Shipyard Group, earnings for FY05 are expected to increase significantly, as the group's stakes in these yards will also increase. The purchase will raise Cosco Corp's earnings by 48 per cent to 55 per cent by our estimates, as Cosco Corp (S) will now hold a combined 75.5 per cent stake in Cosco Nantong shipyard (50 per cent previously) and a 60 per cent stake in Cosco Dalian (40 per cent previously).

BUY maintained. Our fair value is $1.33, based on RNAV (revalued net asset value) of the group's ship-repair, shipping and property holdings. With the purchase, CCS's FY05/06 net profits are estimated to rise to $95 million and $110 million, while corresponding FY05/06 PEs are forecast at 13.7x and 11.8x.
BUY.