Cosco Corp

Cosco Corp: Announced a record breaking turnover and strong profit growth for FY10. Rev for 4Q10 at $1.11b, +55.5%YoY and +16.6%QoQ, while Net Profit at $93.6m, +431%YoY and +74.7%QoQ. Results brings FY10 rev to a historical high of $3.86b, +33.2%, while Net Profit to equity holders was at $248.8m, +126%YoY, and exceeding market average consensus of $200m. ..

Strong performance was attributed to better shipyard performance, with sales increasing 35.2% in FY10 due to higher contributions from ship building and marine engineering projects, which more than offset the marginal 3.2% lower turnover from dry bulk shipping business which stood at $128.6m, due to lower charter rates.....

Gross Margins increased slightly QoQ, at 14.5% vs 3Q 12.1%, while Overall, FY10 Gross Margins was at 12.3% vs FY09 10.3%, due to greater cost efficiencies in dry bulk shipping and higher profit contributions from ship building and marine engineering business on turnover rise....

Going forward, grp remains confident on prospects and will focus on deliveries and capability, capacity and efficiency enhancements, noting that grp have yielded positive results despite a challenging yr for the industry. Against the backdrop of an uneven global economic recovery and inflationary cost pressure, Grp maintains a cautious outlook for 2011....

We note that Grp’s orderbook remains strong at US$6.1b, underpinning earnings all the way till 2013 which will keep the Grp’s shipyards busy, while new orders received in 2010 totalled more than US$ 2.1b, with grp delivering a total of 32 bulk carriers in 2010 and 1 jack-up rig and 3 multipurpose heavy lift vessels....

At current price, valuations appears fair, with grp trading at 18.2x FY10 PE, vs peers average of 20x and historical average of 22.9x, with a low Net Gearing of 10.4%, while grp has announced a dividend of 4c/share. Detusche maintains Buy Call with $2.30 TP, based on FY13 estimates.