Cosco S'pore responds to SGX queries on price fal

Cosco S'pore responds to SGX queries on price fall

23% of the company's shipbuilding contracts are with companies within the wider Cosco group.

By Wong Wei Kong
Oct 16, 2008
The Business Times

COSCO Corp Singapore finally broke its silence yesterday on several issues which had driven down its share price, after it was prompted by several queries from the Singapore Exchange (SGX) to issue a statement.

News of Cosco's Norwegian client MPF Corp filing for bankruptcy recently had spooked the market, and fanned worries that the credit crisis could squeeze demand for new shipbuilding and lead to order cancellations. Cosco shares lost around 37 per cent over two days to close at 79.5 cents yesterday.

In its statement after the close of trading, Cosco said that it was brought to its attention that MPF, the buyer of a floating, production, drilling, storage and off-loading (FPDSO) unit being built by subsidiary Cosco Dalian, had sought bankruptcy protection. However, it has not received any official notification of the bankruptcy protection sought by MPF.

The value of the MPF contract is about US$119 million. MPF has made payments for the first three instalments amounting to US$98 million. The fourth (and final) payment of some US$21 million is due to be paid upon delivery of the vessel, scheduled for Dec 15.

'To date, Cosco Dalian has not received any indication from MPF that it is not willing or not able to make payment of the last instalment, and Cosco Dalian continues to perform its obligations under the building contract,' Cosco said.

Under the building contract, Cosco Dalian also has the right to sell the vessel if the payment of any instalment is not made by MPF. Based on current market prices, proceeds from the sale of the vessel would be more than sufficient to cover the sum of the outstanding instalment, Cosco added.

Giving an update on its dry bulk carrier delivery schedule, Cosco said that its subsidiary, Cosco Shipyard (Zhoushan) Co Ltd, had contracted with certain subsidiaries of the wider Cosco group for the construction and delivery of the first 10 units of 57,000 dwt dry bulk carriers.

An understanding has been reached with the counterparties that the first of these vessels will be delivered by Dec 31. The remaining nine vessels will be delivered progressively.

'To date, all the other remaining vessel building contracts being undertaken by the company's subsidiaries at Dalian and Guangdong are proceeding according to original schedule,' it said.

Other than a previously announced cancellation in April 2008, there has been no other cancellations of orders, Cosco said. 'The company is not aware of any solvency issues relating to its suppliers and/or customers.'

No profit warning is required and 23 per cent of the company's shipbuilding contracts are with companies within the wider Cosco group, it added.

Cosco - when silence is not golden

When silence was not golden

Singapore Business Times - 16 Oct 2008

COSCO Corp Singapore truly became a penny stock yesterday, with another tumble in its share price in what was an acute crisis of confidence.

The stock fell 20.5 per cent or 20.5 cents to 79.5 cents yesterday - this coming after it crashed almost 17 per cent on Tuesday.

That slide will likely be checked, now that Cosco has come out to address some of the concerns the market had over the company.

But the question remains why the company waited so long to clear the air, and did so only after it was queried by the Singapore Exchange.

Tuesday's fall was attributed to a downgrade in Cosco's target price by Credit Suisse to 55 cents from $1.20, with an 'underperform' rating. Credit Suisse said in a report that it expects Cosco shares to drift lower on concerns over shipbuilding demand, risk of order cancellations and delivery delays.

The view that the current credit condition could squeeze demand for new shipbuilding and lead to order cancellations by clients hit by tighter credit lines is one that was widely held, especially after news of Cosco's Norwegian client MPF filing for bankruptcy.

Cosco declined, however, to address these issues when presented with the chance on Tuesday, when the media asked the company to comment on the market's concerns. It was an opportunity missed, and one with costly consequences for its shareholders. Not surprisingly, given the lack of any assurances from the company, the stock continued its slide yesterday on heavy volumes, as more joined in the downgrades.

Why was it so difficult for Cosco to provide timely assurances to the market? Other companies had provided updates and assurances on their businesses when there was a need to. When the tainted milk scandal broke out in China, Chinese food-related companies here issued statements to tell investors what the impact, if any, was on their operations. Similarly, when the Sichuan earthquake took place, listed companies with operations in the region all issued statements to update shareholders. So too when hurricanes struck the US.

In sharp contrast, FSL Trust Management Pte Ltd, the trustee-manager of First Ship Lease Trust (FSL Trust), took the initiative to assure investors after its units also fell in heavy trade. It said yesterday that FSL Trust continues to receive steady lease rental payments from its eight lessees, has a robust set of risk management protocols and is in regular dialogue with its lessees with regard to their credit-worthiness, and reaffirmed its earlier distribution per unit guidance.

Cosco's reticence is all the more surprising given that the lack of communication from the company was cited as a key factor for the market's loss in confidence. Said Credit Suisse in its report: 'Inadequate disclosure on dry bulk newbuild schedule and no announcements on successful delivery of dry bulk vessel to customer to-date (against 10 planned deliveries in 2008 and 41 vessels in 2009) heighten our concerns on execution risk.'

There was clearly an information gap regarding Cosco. As one investor noted in an email to BT, CIMB also made a call on Cosco on Tuesday, the same day Credit Suisse issued its downgrade. But the two calls were poles apart. In opposition to Credit Suisse, CIMB said: 'Key catalysts for Cosco include better-than-expected offshore and conversion orders coupled with falling steel prices. We maintain a 'buy' call with a target price of $2.89.'

The sharply contrasting calls indicated that Cosco had given little guidance to the market, leaving analysts to make their best or worst assumptions. The company's silence simply fanned speculation that bad news may lie just around the corner.

Cosco's statement last night may arrest the fall in its share price. But it may have come too late. Two days of fear-driven selling have destroyed a huge chunk of shareholder value, and more importantly, shattered trust in the company. Rebuilding credibility may prove a major challenge for Cosco.

中远投资获3.6亿元合约

中远投资获3.6亿元合约

(2008-09-24)

　　中远投资(Cosco Corp)属下子公司中远船厂集团(Cosco Shipyard Group)获得总值2亿5620万美元(3亿6184万新元)的造船和改造船合约。

　　其中价值1亿零800万美元的造船合约来自一家德国客户，中远船厂集团下的大连船厂将为其建造两艘各8万载重吨(DWT)的散装货船，30％的付款已收到。这两艘船预计将分别于2010年和2011年移交。

　　总值1亿4820万美元的九份改造船合约来自美国、中国、香港、印度和意大利客户，包括把一艘油槽船改造成浮式生产储油船、一艘船船首的改造以及七艘油槽船改造成散装货船，预计明年第四季前陆续完工。

大客户MPF破产 中远投资股价昨重挫

大客户MPF破产 中远投资股价昨重挫

(2008-10-11)

　　全球信贷的持续紧缩也开始影响了岸外海事业。

　　中远投资（Cosco）的大客户——挪威MPF公司因无法成功融资而申请破产保护，成为继挪威MPU Offshore Lift ASA破产后，另一家受到金融危机所累而倒下的岸外业者。

　　中远是于2006年底与MPF公司签订了一项价值1亿2000万美元的合同，为后者兴建一艘多功能钻井生产储油船的船壳，以供应给巴西Patronas，并预定于今年交货。然而，随着成本骤然飙升、预算严重超支，MPF公司原本拥有的6亿5000万美元资金并不足够，同时在信贷冻结、市场不看好这项工程的情况下得不到融资，在本地和中国工程活动也告终结。

　　目前，MPF公司正尽力变卖手上建筑和器材合约。一名岸外业者表示：“我们的销售和融资努力，并没有吸引到任何买家和投资者的支持，公司耗尽了资源，唯一的选择是在破产法令的保护下继续进行资产出售和套现。”

　　尽管中远投资已获得此工程的大部分款项，这项突如其来的消息却仍打击投资者的信心，中远投资的股价昨天重挫15.4％，闭市报1.1元。这只龙筹股今年以来价格已下跌了80.97％。

　　星展唯高达（DBS Vickers）表示，在来临的年底中远投资更新部分租船合约之际，可能进一步受到船只租金剧烈下滑达三成的打击。