Cosco

Cosco: DBSV maintains Fully Valued with $0.88 TP. Note that grp has secured a new contract worth over US$200m, to build a harsh environment Semi-Sub Accommodation Vessel valued at over US$200m. House note that learning curve is steep as these orders are new vessel types to Cosco. In addition, as a 2nd-tier yard, it competes on pricing to secure orders, in a bid to establish a track record in the offshore space. Note the contract value of US$200m is 23-31% lower than the semi-sub accommodation rigs secured by Keppel and SMM in June/Dec'11, which were valued at over US$260m/US$290m. While this could be due to different vessel type, specification and equipment, the variance in price is wide, implying low margins. Overall, house note that while revenue visibility is improving, current valuation of 18x FY12 PE and 1.8x P/B appear expensive for a company with patchy track record. Maintain FULLY VALUED and TP translates to PE of 14.7x on FY12 earnings.