Monday, April 20, 2009

Daily news - 20 Apr

Order cancellations key issue at Cosco (S'pore)
Cosco Corp (Singapore) – As Cosco Corp (Singapore) continues to weather an extremely challenging year for the shipping and shipbuilding industry, it's annual general meeting today should be an interesting affair as shareholders are likely to want some good answers as to how the fortunes of a one-time S-chip favourite could have slipped to the point where it barely treads water above penny stock status now. Prime among shareholders' concerns must be the spate of order cancellations and reschedulings that have come up in the past quarter alone and which look likely to be a continuing trend as the beleaguered industry continues to wallow amid a global slowdown in trade and weak oil prices. Another worry, which is also a sign of the current conditions, would be if the usual seeking of a mandate to issue shares and/or convertible securities is a precursor to a rights issue. Cosco has not said it is in need of capital. But it has announced several expansion plans recently, such as the securing of land utilisation rights in Qidong, Jiangsu province that is meant for expansion of its rig-building facilities which it announced in March. Investors will want to know if all these plans are going to translate into some potential cash calls in the year ahead. Other queries may centre around the financial statements and revenue recognition policy that the company adopts. Cosco has run into problems in the past when it announced contracts that were subsequently cancelled, which have in turn adversely affected its share price. Cosco went on to change its policy to only announce newbuilding contracts after the first instalment has been paid.

Source: Kim Eng

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