Cosco Corp announced yesterday that it has secured two contracts worth over US$100m to repair and convert two large crude carrier tankers, to Floating Production Storage and Offloading (FPSO) vessels for Japanese and a European ship-owner respectively. Both vessels are scheduled to be re-delivered to their owners around the 3Q11. We believe the value is within most analysts’ order win assumption and hence, unlikely to have a major impact on the group’s earnings forecasts.
Separately, Cosco said that Cosco (Dalian) Shipyard and Cosco (Zhoushan) Shipyard have each delivered one unit of bulk carrier to their European buyers respectively. As a recap, Cosco reported 1Q10 net profit of S$31.7m (-4% YoY) despite revenue climbed 17% to $835m. The lower margin was mainly due lower dry bulk shipping charter rates and weaker profit contributions from ship repair and conversion business.
Including the latest contracts secured, we estimate Cosco has an outstanding order book of about US$6.0bn with progressive delivery up to 2012 which will keep the Group’s shipyards busy. The stock is currently trading at consensus 19.6x FY10 and 15.3x FY11 P/E.
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