COSCO Corp (S) Faces Two Cancellation Orders From Indian Customer
COSCO (S)'s client, Great Eastern (GE) Shipping in India, has announced on the Bombay Stock Exchange (BSE) for two cancellation orders it had placed with a Chinese shipyard. According to Clarksons, we believe it is referring to COSCO (S) as GE shipping had placed four 57,00 dwt dry bulk carriers with COSCO (Zhoushan) and another four with Korean shipyards. These two units, which were due for delivery in 2009-2010, were part of a quartet of supramaxes GE Shipping has on order with COSCO (S). No official announcement has not been made by COSCO (S) yet and the management made no comments on the news release.
The contractual prices of these two dry bulk carriers were expected to cost US$38-42m each. While the impact on earnings and valuation are insignificant, share price could see a knee-jerk sell-down. We think that a lot of negatives have been priced into the share price. We will provide with more details pending further clarification from COSCO (S).
