COSCO Corporation - Strong Growth In Contracts Awarded

COSCO Corporation (COS (S)) recently secured shipbuilding contracts worth
US$1.2b, propelling its contracts awarded ytd to S$4.4b. COS (S)’s ability to
continue to secure contracts is astounding and reaffirms our belief that COS (S)
will be able to substantially grow its shipyard business in the coming years.
Raising our contract award estimates for FY07. Ytd, COS (S) has secured
S$4.4b in contracts, surpassing the S$800m which it secured in 2006. This also
exceeds our assumption of S$3.0b worth of contracts awarded in 2007. As
such, we are raising our assumptions for contracts awarded for 2007 to S$6b
Better visibility equals higher earnings growth and higher valuation. We
are raising our 2007, 2008 and 2009 earnings estimates by 2.4%, 8.6% and
11.2% respectively on the back of new contract wins and better freight rates.
We maintain our BUY recommendation and raise our target price to S$4.12
(previously S$3.50) based on sum-of-the-parts valuation.