Disclaimer

Disclaimer:-Please note that all such analysis is provided by way of information only. All of the information was and should be taken as having been prepared for the purpose of reference only and that none were made with regard to any specific investment objective, financial situation or the needs of any particular person who may receive the analysis. Any recommendation or advice that may be expressed in or inferred from such analysis therefore does not take into account and may not be suitable for your investment objective.

Thursday, July 17, 2008

Cosco Research Report

by Citigroup Research (17 July)

Cosco signed a Letter of Intent (LOI) with Sevan to exercise its earlier option to build the second and third Sevan 650 drilling units. Based on the first rig contract value (USD170m or SGD230m), subsequent projects should be worth more than USD200m each, after factoringin higher raw material prices. Currently, a deposit of USD7m is paid for the LOI.

Expanding its work beyond hull fabrication is a key catalyst for the stock, as it demonstrates its technical strength and entrenches its value-add further in the supply chain.

Cosco recently garnered options to build six additional semisubs for Sevan, thus more projects could be in the pipeline. The potential contract value could range from USD 1.6b to USD 4b for eight semisubs (assuming the remaingin six options are converted).

Target price is based on 14 to 15 times FY2009E PE.

-Research Report by Citigroup Research (17 July)
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