Cosco - a Potential $10 stock in the next 10 years

Quote : from shareJunction

Based on the Restructured Group, Cosco shall benefit from : 

1. Ship repair and maintenance business support from the enlarged merging entity of China Cosco and Shipping now known as China COCO Shipping Corporation Limited. (See the below for some brief but useful introduction). If Maersk is a Giant, they call this merged entity The Leviathan.  

2. Cosco (S) will be grouped under one of the 6 + 1, under  Equipment manufacturing industrial cluster.

Equipment manufacturing industrial cluster

The equipment manufacturing industrial cluster includes shipbuilding, offshore equipment manufacturing, ship repair, container manufacturing, etc. As a key industrial cluster, it will further sharpen its advantages in core technologies and market share in offshore equipment manufacturing, shipbuilding and other related fields.

Notice the keyword : Container Manufacturing. Thus, I deduced there will be further " internal restructuring or even injection" of asets and business to form the new Equipment manufacturing industrial cluster.  

Conclusion: It is time to buy. Those who remember Cosco shoots up from 30 cents to $8 will find it is quite realistic and achievable to set the humble target of 60 to 80 cents, with valid reasons from more business growth and support from The Leviathan. 

  

  

INTRODUCTION

The total fleet of China COSCO Shipping comprises of 1114 vessels with a capacity of 85.32 million DWT, ranking No.1 in the world. Its container fleet capacity is 1.58 million TEU, ranking the fourth in the world. Its self-owned dry bulk fleet (365 vessels/33.52 million DWT), tanker fleet(120 vessels/17.85 million DWT), general cargo and specialized cargo fleet (3 million DWT), are No.1 in the world in terms of capacity.

The Company owns over 46 container terminals all over the world, with over 190 berthing spaces. The throughput of its container terminals worldwide amounts to 90 million TEU, taking the second place in the world the global sales volume of its ship bunker fuel exceeds 25 million tons, topping the world&rsquo s list the container leasing business scale surpasses 2.7 million TEU, which is the third-largest in the world and its offshore engineering manufacturing competence and vessel agency business are also leading in the world.

 

The vision of China COSCO Shipping is to undertake the mission of globalizing Chinese economy, consolidate advantageous resources, take global shipping, integrated logistics, and shipping related financial services as core business, and develop diversified industrial clusters, so as to build a world-leading business entity that provides integrated logistics and supply chain services.

Focusing on four strategic dimensions, which are &ldquo scale growth, profitability, anti-cyclical capability and building a global company&rdquo , the Group highlights the &ldquo 6+1&rdquo industrial clusters layout. The &ldquo 6&rdquo is shipping, logistics, finance, equipment manufacturing, shipping services, and social services industrial clusters. The &ldquo 1&rdquo means &ldquo Internet Plus&rdquo business based on business model innovation. This layout will help facilitate the integration of shipping factors and build a world-class logistics service provider.

Shipping industrial cluster

The Company&rsquo s shipping industrial cluster comprises of container shipping, terminal investment and operation, tanker shipping, LNG shipping, dry bulk shipping and passenger liner services. As one of the core industrial clusters, it will further cement the position of China COSCO Shipping as the No. 1 integrated shipping company in the world.

Logistics industrial cluster

The logistics industrial cluster includes project logistics, freight forwarding, warehouses, multi-modal transport, vessel agency, etc. As a world-class third-party logistics service provider, the Company will be a good partner for Chinese enterprises to go global.

Finance industrial cluster

The finance industrial cluster includes ship leasing, shipping insurance, supply chain finance, logistics park investment, equity investment, and asset investment (especially infrastructure investment along the &ldquo Belt and Road&rdquo ). Its objective is to become the No. 1 shipping finance and logistics finance industrial cluster in China and gradually taking on the leading status in the world.

Equipment manufacturing industrial cluster

The equipment manufacturing industrial cluster includes shipbuilding, offshore equipment manufacturing, ship repair, container manufacturing, etc. As a key industrial cluster, it will further sharpen its advantages in core technologies and market share in offshore equipment manufacturing, shipbuilding and other related fields.

Shipping services cluster

The shipping services cluster includes ship management, crew management, ship spare parts procurement, communication & navigation technology management, ship fuel and materials supply, etc. It will provide a strong guarantee for the major business segments of the Company.

Social services industrial cluster

The social services industrial cluster includes real estate development, hotel management, hospitals, universities and other social services. It is both an incubator for new industries and a base for professional training.

&ldquo Internet Plus&rdquo business

Based on business model innovation, the &ldquo Internet Plus&rdquo business will serve new demand with quality big data services, with an aim to propel upgrading and transformation of all our business segments, and combine internet resources with shipping factors.

Following the concept of &ldquo One Team, One Culture, One Goal and One Dream,&rdquo China COSCO Shipping Group strives to be an outstanding enterprise that is larger, more globalized, competitive and valuable, as well as a better practitioner of national initiatives, a better service provider for its customers, a better partner for its suppliers and a better career development platform for its employees.

CONTROLLING SHAREHOLDER RESTRUCTURING The board of directors (the & ldquo Board& rdquo ) of COSCO Corporation (Singapore) Limited (the & ldquo Company& rdquo ) wishes to announce that on 4 May 2016, it has received notification from China Ocean Shipping (Group) Company (& ldquo COSCO Group& rdquo ), its controlling shareholder, that the State-owned Assets Supervision and Administration Commission of the State Council of the People' s Republic of China (& ldquo SASAC& rdquo ) has conducted a restructuring of the Company at the controlling shareholders& rsquo level, whereby the entire equity interest in COSCO Group held by SASAC has been transferred at nil consideration to China COSCO Shipping Corporation Limited (& ldquo COSCO Shipping& rdquo ), a state-owned enterprise whollyowned and controlled by SASAC, upon completion of which COSCO Shipping indirectly held approximately 53.35% equity interest in the Company through COSCO Group, and became an indirect controlling shareholder of the Company (the & ldquo Controlling Shareholder Restructuring& rdquo ). SASAC has granted its approval of the registration in respect of the Controlling Shareholder Restructuring, and the registration procedures for the Controlling Shareholder Restructuring have been completed. Before and after the Controlling Shareholder Restructuring, COSCO Group remains the direct controlling shareholder of the Company and the Company remains ultimately controlled by SASAC. The Board has also been informed that COSCO Group has sought and obtained a ruling from the Securities Industry Council that COSCO Shipping will not be required under Rule 14.1 of the Singapore Code on Take-overs and Mergers to make a mandatory offer for the shares of the Company which are not already owned or controlled by SASAC, COSCO Group or COSCO Shipping, as a result of the Controlling Shareholder Restructuring. By Order of the Board Wu Zi Heng Vice Chairman and President 4 May 2016 ________________________________________________________________________________ 1st quarter Financial Report 2016 By James Yeo - May 9, 2016 | More on: F83 COSCO Corporation (Singapore) Limited (SGX: F83) had released its fiscal first-quarter earnings (for the three months ended 31 March 2016) last Friday. As a brief background, COSCO provides ship repairing, ship building, and marine engineering services. It is also a subsidiary of China Ocean Shipping (Group) Company, China’s largest shipping group. With that as a backdrop, let’s dig into the firm’s latest earnings. Financial highlights The following’s a quick rundown on some of the latest financial figures for COSCO: For the reporting quarter, COSCO’s revenue had slumped by 27% year-on-year to S$722.3 million due to lower revenue contribution from its marine engineering and ship building activites. But, the company’s gross profit managed to increase by 22.3% to S$89.3 million in the same period. Yet, COSCO’s bottom-line plunged into the red, from a profit of S$4.25 million in the first-quarter of 2015 to a loss of S$11.7 million in the reporting quarter. COSCO had suffered from a 31% decline in other income (to S$13.8 million) and a huge 54% spike in Finance expenses (to S$59.7 million). Moving on to the balance sheet, COSCO ended 31 March 2016 with a net debt position of S$4.96 billion (S$2.21 billion in cash and equivalents and S$7.17 billion in total debt). The company’s net debt position has climbed significantly from the S$3.73 billion seen in the first-quarter of 2015. COSCO also has S$4.53 billion in borrowings which are repayable within a year of 31 March 2016 (or can be called back on demand); investors might want to see if the company’s finance costs will rise when it refinances its debt given the challenging environment for the shipping industry. Last but not least, COSCO had recorded negative cash flow from operations of S$184 million in the reporting quarter, a step down from the negative S$101 million seen a year ago. Future prospects COSCO had given some comments in the earnings release on its dim outlook for the near-term future: “Under such challenging circumstances, new orders started to decline in 2014 and this continued throughout 2015 and into Q1 2016. Some customers have delayed accepting delivery of projects upon completion and it is possible that more customers will seek to delay delivery of projects or seek deferment of payment schedules. Any rise in wages, prices of raw materials required for production as well as higher financing costs may exert even greater downward pressure on the operating margins of the Group’s shipyard operations. “

Man Who Called China's Boom and Bust Now Warns of Crisis Risks - Hao Hong at Bocom

Man Who Called China's Boom and Bust Now Warns of Crisis Risks
Kyoungwha Kim 
December 23, 2015 — 12:01 AM HKT Updated on December 23, 2015 — 5:00 PM HKT
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Hao Hong at Bocom International sees strains in property, debt
``All roads to hell are paved with positive carry,'' Hong says
One of the few forecasters to predict both the start and peak of China’s equity boom is now warning the nation will be buffeted by the same forces that caused financial crises around the world over the past four decades.

Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong, says a shortage of dollars was the common feature in the oil rout in the 1970s, Latin American debt turmoil in the 1980s, the Asian currencies collapse in 1997 and the global crisis in 2008. Next year will see Federal Reserve interest-rate increases, an improving U.S. current-account balance and a stronger greenback, putting strains on the most-leveraged parts of the world’s second-largest economy, he says.
"Historically, every time the U.S. current account improved, concurrent with dollar strength, some country somewhere in the world plunged into some sort of crisis," Hong said. “The pressure from a Fed tightening and thus a dollar liquidity shortage scenario will more likely show up” in Hong Kong property as well as China’s online lending and high-yield corporate bonds, he said in an interview.
The yuan, for many years Asia’s most-profitable carry trade when adjusted for volatility, has weakened 4.2 percent against the dollar in 2015 as the yield advantage of China’s sovereign debt over U.S. Treasuries fell to the narrowest in five years. Chinese companies that borrowed in foreign currency at a record pace in the past three years are now buying dollars to protect against losses. Hot money that entered China with fake export invoicing, metals purchases and disguised foreign investment is now heading for the exit.

“All roads to hell are paved with positive carry,” said Hong. “Over the past few years, one of the biggest carry trades was to borrow dollar debt unhedged given the one-way expectation for yuan appreciation. We are seeing companies paying down dollar-denominated debt fast, and thus alleviating some of the risks, but not all.”
 
Improving U.S. Current Account and Stronger Dollar Spell Trouble
The yuan strengthened 13 percent against the dollar in the four years through 2013, before retreating 2.4 percent in 2014. This year’s loss is set to be the biggest in more than two decades. The currency’s Sharpe ratio, a gauge of rewards that factors in the risks investors take, is the highest among 22 emerging markets for the period since 2010, reflecting its appeal to investors who buy higher-yielding currencies with funds borrowed in countries that have lower interest rates.
With online financial services exploding, the total amount of outstanding peer-to-peer loans in China stood at 351 billion yuan ($54 billion) in October, according to iResearch Consulting Group, and Hong highlighted this as an area that’s experienced a hefty buildup in leverage. Hong Kong’s house prices, which more than doubled from 2009, may drop as much as 20 percent in the next three to six months, Bocom forecast. Dollar bond issuance by Chinese companies increased every year since 2008, jumping to a record $94 billion in 2015 from $2.4 billion seven years ago.
Rising Defaults
The yield premium that investors demand to hold dollar-denominated high-yield Chinese bonds over U.S. Treasuries declined to a two-year low of 607 basis points in October and was at 705 basis points on Dec. 22, according to Bank of America Merrill Lynch data. The credit spread is “not enough to justify its risks,” Hong said.
Chinese companies are struggling to generate the cash flow needed to service their obligations as economic growth slows to the weakest pace in 25 years and corporate profits shrink. While the debt burden has been eased by six central bank interest-rate cuts in 12 months and a tumble in corporate borrowing costs to five-year lows, the number of defaults is on the rise. The amount of bad debt reported by Chinese banks rose 10 percent in the third quarter from the previous three months to 1.2 trillion yuan.
The Communist Party’s Politburo vowed on Dec. 14 to prevent systemic financial risks in 2016, according to a statement on the State Council’s website after a meeting chaired by President Xi Jinping. China listed de-leveraging as the government’s major task next year, along with cutting industrial capacity and lowering corporate costs, Xinhua News Agency reported Dec. 21, citing a statement released after an economic planning meeting attended by the nation’s leaders.
Capital Outflows
The prospect of further easing in China and interest-rate increases in the U.S. risks accelerating capital outflows. Financial institutions including the People’s Bank of China sold 221 billion yuan of foreign exchange in November, a sign funds are heading overseas. In the U.S., Federal Reserve officials forecast borrowing costs will rise to 1.375 percent by the end of 2016, implying four 0.25 percentage point moves. The gap between Chinese and U.S. five-year government bond yields has narrowed 86 basis points this year to around 100 basis points, lessening the appeal of the Asian nation’s notes.
The Fed’s trade-weighted dollar index reached a 12-year high on Dec. 17 as the world’s largest economy strengthened and a rout in emerging markets propelled the greenback higher against the currencies of a broad swathe of U.S. trading partners including China. That followed an improvement in the U.S. current-account deficit, which was equivalent to 2.5 percent of gross domestic product in September, down from 5.9 percent a decade ago.
2016 Challenges
Hong recommended investors stick to assets of companies that have relatively low balance-sheet leverage in 2016 given the elevated risk of a liquidity event. He forecast the yuan will depreciate by 5 percent versus the dollar in 2016 and estimated that fair value for the Shanghai Composite Index is around the 2,900 level, implying a 20 percent decline from Wednesday’s close.
The yuan was little changed at 6.4778 a dollar in Shanghai, while the 10-year yield fell four basis points to 2.84 percent. The benchmark stock index fell 0.4 percent to 3,636.09.
Hong turned positive on Chinese stocks in September 2014, saying government support for the market meant it was "time to throw our senses out of the window," ignore weakening economic data and buy on dips. The Shanghai Composite more than doubled from the time of his recommendation through its June 12 peak. In a June 16 interview with Bloomberg Television, Hong said China’s stocks were heading for a "notable crash" after entering a bubble. The equity gauge plunged 40 percent from that date through its low on Aug. 26.
“In the new year, the challenge is that we become too complacent with our reform achievements, and lose sight of risks of financial contagion as China’s financial system gradually opens up,” Hong said. “Risks will also flare up in other unexpected sectors with high leverage should the U.S. rate hikes progress faster than expected.”