Cosco

Cosco: The worst is not over for Cosco DBS Vickers says. 1Q12 net profit of S$27.8m, -25% yoy, was disappointing at only 21% of its FY12 forecast amid weak shipping earnings on low freight rates and lower-than-expected profit from low-priced shipbuilding contracts, it says. Tips a lackluster outlook for shipping, ship-repair and shipbuilding, with Cosco under pressure to fill its yards' capacity as most bulk-carrier orders will be delivered by 1H13. The offshore segment is the silver lining amid an upturn in offshore projects, it says, noting strong year-to-date order wins of US$1.1b, about 53% of DBSV's US$2b 2012 assumption. But adds, climbing up the learning curve is a key challenge. DBSV cuts its FY12-13 earnings forecasts by 9% and 4% respectively. House keeps a Fully Valued call with $0.88 TP.