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Cosco Corp (F83.SG) shares are halted pending an announcement, after closing 3.9% higher at $2.42 Wednesday in healthy volume due to speculation over group restructuring.
UOB-KayHian, which has a Buy rating and $2.50 target, says the restructuring “could result in Cosco Corp acquiring key shipyard assets from Cosco Group, while divesting its dry bulk shipping fleet of 12 vessels to China Cosco. Cosco Corp’s stake in Cosco Shipyard Group would likely be raised to 70% from 51% with the acquisition of a 19% stake from Cosco Group.”
UOB-KayHian, which has a Buy rating and $2.50 target, says the restructuring “could result in Cosco Corp acquiring key shipyard assets from Cosco Group, while divesting its dry bulk shipping fleet of 12 vessels to China Cosco. Cosco Corp’s stake in Cosco Shipyard Group would likely be raised to 70% from 51% with the acquisition of a 19% stake from Cosco Group.”
It says that would transform Cosco Corp “into a full-fledged shipbuilding group in one fell swoop.” It adds, the exact impact on earnings is hard to quantify at this juncture, “but we would expect earnings enhancement.”
It tips 2011, 2012 net profit of $275.0 million and $348.0 million respectively, and estimates that the acquisition of 19% of CSG would likely enhance 2012 net profit by 16%, divestment of the dry bulk business would reduce 2012 earnings by 21%.
