Cosco announced that it has secured additional contracts valued over US$70m to build two bulk carriers of 92,500dwt. We understand Cosco has already received the initial deposits from the Hong Kong ship owner. They will be built at its Dalian shipyards and are scheduled for delivery in Nov 2011 and Jan 2012 respectively. This implies a construction time of around 15 mths, which is slightly better than Cosco’s current build time of around 16 mths.
However, the pricing of around US$35m per vessel reflects the current soft prices for newbuilds, which is a cause for concern. Despite seeing an improvement in its shipbuilding margin to about 6-8% in 2Q10, this is still relatively low compared to its peers such as Yangzijiang. Going forward, we believe share price will continue to be supported by its strong order momentum. The stock currently trades at about 21x FY10 and 16x FY11 PER.
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