Cosco

Cosco: 1Q14 results missed slightly although net profit rose 48% y/y to $23m, while revenue rose 42% to $1b, from higher revenue contribution from ship repair and marine engineering, offset by decline in ship building. Gross margins fell from 10.72% to 9.2%, but could have been lower around 8% if not for the lower depreciation charge. Pre-tax profit saw a $9.4m boost from the reduction in depreciation charge from a change in the estimated useful life of some fixed assets. YTD orderwins totaled US$210m, with net orderbook of US$7.6m. Cosco is targeting US$2b in new orders this year, although Maybank KE does not expect commercial shipbuilding orders to return in a big way. Meanwhile, Cosco’s weak execution of offshore contracts remains the key drag on profitability. Maybank KE maintains Sell with TP of $0.65