The Straits Times / The Business Times News on Cosco

CIMB-GK raises target price for Cosco, expects more jobs

CIMB-GK Research has raised its target price for Cosco Corporation (Singapore), maintaining its 'outperform' recommendation on the ship repair and dry bulk shipping company.

The research house believes that 'Cosco's contract win momentum is not spent yet'. 'We anticipate this based on the massive capacity expansion coming through on (Cosco's) Zhoushan yard, increasing (Cosco's) capacity by 30 per cent by mid-FY07),' said CIMB-GK in a report released yesterday. The firm also noted that Cosco has been getting its Dalian and Zhoushan yards ready for rig development by December, in order to prepare for a full jack-up rig order. Cosco's order book currently stands at $785 million, after $165 million worth of conversion contracts, and CIMB-GK estimates about 80 per cent of these orders will be recognised in FY07.

The research firm said that contrary to its earlier belief, Cosco's core business of ship repair and conversions is a contributor to the company's share price upside potential. 'Cosco's order book visibility is growing much better than anticipated. The bread-and-butter business is looking much more exciting than previously thought,' said CIMB-GK.

Cosco recently reported its 13th straight quarter of profit growth. Net profit for the third quarter ended Sept 30 rose 26 per cent year-on-year to $71.5 million, or 3.23 cents a share, from $56.6 million, or 2.58 cents a share.