SINGAPORE (Aug 8): DBS Vickers Securities is maintaining its “hold” call on Cosco Shipping International (Singapore) with an unchanged target price of 27 cents after the group last week reported a narrowing of its 2Q losses to $20.8 million.
See: Cosco Shipping 2Q net loss narrows to $20.8 mil
In a Tuesday report, analyst Ho Pei Hwa suggests that Cosco’s recently-signed memorandum of understanding (MoU) to acquire a 40% stake in PT Ocean Global Shipping, a shopping logistic service provider, from its sister company, could be a hint about the group’s possible core business in future.
Similar to DBS’ report in May, Ho reiterates her advice for existing investors to hold on to the stock for more clarity on the group’s future direction and potential parental asset injection.
To recap, Cosco’s parent company had previously offered to buy out the group’s shipyard business for RMB1,466 million ($300 million) cash in May, pending shareholders’ approval at the EGM to be held on Aug 30, as well as regulatory clearance from China.
See: Parent company throws Cosco Shipping a lifeline
Ho is again in the view that the deal remains attractive, as Cosco’s ability to operate as a going concern is deteriorating rapidly with its unsustainably-high gearing level.
“An earlier-than-expected recovery in oil prices could catalyse an industry recovery with Cosco securing more orders at attractive prices. Sharp improvements in productivity could also cause its share price to re-rate. Last but not least, the ‘bail-out’ by its parent would be deemed positive as well,” concludes the analyst.
As at 11.18am, shares in Cosco are trading 1.7% higher at 30 cents.
