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Corporate News
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| CHINA COSCO 01919
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6/2/2012
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| Action
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Buy
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| Target Price |
$5.400
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| Reason |
BDI just too low – Trading BUY China COSCO (1919) Year-to-date, BDI has plunged by 60% to 651, even below the bottom of 663 in December 2008. Comment: We believe the plunge in BDI is attributable to seasonal factor (slower trading activities during CNY), weather disruptions in Brazil and Australia which affected commodity supply in those regions, as well as the long-sited huge delivery. According to Clarksons’ estimates, 1Q12 delivery will hit a high of over 50mn tons, much higher than 20-25mn tons from 1Q10 to 4Q11. However, it is estimated that current BDI is already below break-even rates by over 50% and we believe some routes are even below cash costs. As CNY has ended and trading activities resume and shippers holding up capacity, we expect a rebound of BDI in the short term which should boost share price of China COSCO (1919, $4.92). Our 1-month target price is $5.40, equivalent to 1.20x 2012 PBR (0.6 standard deviation above 2011 average forward PBR). (Tommy Lam) |
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Trade Now
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This commentary/recommendation is for information only and is not to be construed as investment advice or as an offer to buy or sell securities. While the commentary/recommendation is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy nor completeness. Neither GCap nor any other Guoco Group companies, (nor any employees or other persons connected with any of them) accepts any responsibility or liability arising from any use of this commentary/recommendation. To the extent permitted under applicable law, the above-mentioned companies or individuals may have used the research materials before publication. However, it is hereby declared that neither GCap nor the writer, at the time of writing, has interest in any of the securities mentioned in this commentary/recommendation. |
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