COSCO Corp

UOBKayhian on 17 Feb 2015


FY15F PE (x): 28.2
 FY16F PE (x): 21.6

Net earnings 57% below estimate. COSCO Corp (COSCO) reported a S$13.2m loss in 4Q14 and net profit of S$20.9m in 2014, coming in 57% below our estimate. While revenue surprised with a 22% upside, S$212m of impairments, allowances and writedowns totalled to drag earnings down. Margins under pressure. COSCO’s gross margin has been on a steady decline since 2013, while the high gearing and large receivables on its balance sheet remains as a concern. With the shipbuilding market expected to remain weak for the foreseeable future, we expect the stock to languish further. Maintain SELL, with a reduced target price of S$0.53. We base our target price on 2015 P/B of 0.8x, translating to a target price of S$0.53.