Cosco

Cosco: Weak set of 3Q12 results which was broadly inline. Rev at $937m, -3% yoy and -3.8% qoq, while net profit at $26.6m, -17% yoy and -3.6% qoq. Gross margins improved at 12.3% vs 8.6% yoy mainly due to higher profit contributions from marine engineering projects. Lower rev was due to lower contributions from grp’s shipyard and dry bulk shipping business and also due to lower sales of scrap materials as well as less compensation received from customers. Grp managed to reverse impairment losses that it typically books on its offshore construction projects, a new area for the shipbuilder. In 3Q12, it made a net reversal of losses of $8.9m when in the same quarter last year it made a provision for $47.4m of losses. 3Q12 rev from shipyard operations fell 3.3% to $923.5m as shipbuilding and repair saw a decline in rev and could not offset the growth in its marine engineering segment. Going forward, grp will retain its focus on improving its O&M engineering offerings and build a sustainable growth in O&M engineering operations and continue to focus on core technical competence and expertise to reach out to a wider customer base. Grp orderbook stands US$5.7b order book, that includes deepwater drillships, semi-submersible barges, jack-up rigs and platform supply vessels. Ratings as follow: CIMB maintains Neutral at $0.85 TP CS maintains Underperform with $0.60 TP Deutsche maintains Hold with $0.95 TP Nomura maintains Reduce with $0.62 TP Macquarie maintains UnderPerform with $0.60 TP JP Morgan maintains U/w with $0.70 TP