HOLD: Kim Eng ResearchJan 02, 2009 The Business Times
COSCO has issued a profit warning, stating that 2008 earnings will be lower than 2007. The bulk of the lowered earnings will be caused by provisions of doubtful debts.
Cosco recorded a net profit of $336.6 million for 2007, and had already posted net earnings of $326.5 million for the first nine months of 2008. This profit guidance therefore deviates significantly from the consensus estimate of $425 million for 2008 earnings and our own forecast of $465 million.
We are downgrading Cosco to a 'hold', while we re-assess our earnings forecast and target price. Specifically, Cosco says it has recently received requests for delays in making payment by several ship owners.
Accordingly, provisions will have to be made for doubtful debts. While increased operational costs such as higher steel and sub-contracting costs and additional development costs at Zhoushan are also being cited, these issues were already well-known and have been addressed by the market.
However, Cosco says that these operational issues have also contributed to further delivery delays, and Cosco said that it is assessing the various causes of delay and considering the need for further provisions for penalties under these contracts.
In addition, Cosco has also announced that it has been asked to reschedule the delivery dates of a total of seven units of 57,000-deadweight-tonne (dwt) bulk carriers by these ship owners.
The delivery dates of four of these vessels have been rescheduled from between February 2010 and June 2010 to between February 2011 and November 2011, and the delivery dates of the other three vessels have been rescheduled from between August 2009 and November 2009 to January 2012.
We are also in the process of factoring in these delays to our forward earnings forecasts.HOLD
Cosco CorporationDec 31 close: $0.95Kim Eng Research, Dec 31
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment