S\'pore Shipbuilders Bruised As Concerns Mount

DJ MARKET TALK: S\'pore Shipbuilders Bruised As Concerns Mount 0711 GMT [Dow Jones] Singapore-listed shipbuilders badly bruised for 2nd straight day, as several broker downgrades of Cosco (F83.SG) exacerbate already-cautious tone triggered by 2 Korean shipbuilders\' order cancellations yesterday. Cosco down 9.4% at S$2.69 on large volume as concerns over lack of near-term catalysts, impact of high steel prices weigh. \"It\'s very likely that hedge funds are shorting the stock,\" says local house dealer, notes sharp drop accompanied by spike in volume. Weakness weighing on Yangzijiang (BS6.SG), off 9.8% at S$0.69 also on high volume. Latter also hurt by CLSA\'s coverage initiation at Sell with S$0.64 target, based on cost concerns. Both stocks now in oversold region based on RSI, Stochastic Oscillator, Money Flow Index. Shares may rebound tomorrow on short-covering if Wall Street rebounds strongly tonight, but underlying issues facing shipbuilding industry will first have to be resolved for investors to stay committed. Respective session lows of S$2.65, S$0.685 may lend Cosco, Yangzijiang support for time being. (FKH)

always fascinating to revisit some analyst or news reports to see how reality has changed. Cosco in above report 3 months ago was $ 2.69! Now 87 cents! Yangzijiang was 68.5 cents! Now 42 cents!

UOB ASIA is launching a Shipbuilding IPO next week -- Otto Marine. This is a shipbuilding company with minimum shiprepair capabilities and small fleet. But I was told by my broker that 3 funds, including Standard Chartered Pte Equity has already taken stakes in the IPO. Supposed to be valued at 6x FY2009 PE. At 6x forward PE, ASL Marine should be worth more than a dollar.

today kim eng agrees with macgyver regarding asl marine being worth more than $1 Bargain valuations We like ASL’s prospects across all its 3 primary business divisions. For shipchartering, ASL is expanding its fleet by 15 vessels over the next 3 years. For shipbuilding, it specialises in higher value added jobs. As mentioned, shiprepair is currently in a purple patch. We are adjusting our net profit forecast up $72.2m from S$69.0m, only to account for the higher than projected $11.3m one-off gains. Core forecast remains intact, as is our target price to S$1.62 based on 8x core FY09 earnings. This implies significant upside for an undervalued stock, trading at just 2.6x.

Otto Marine invitation A copy of the preliminary prospectus is available at : masnet.mas.gov.sg/opera/sdrprosp.nsf/936...ary%20Prospectus.pdf Company Background Otto Marine Limited (“The Company or OM”) is an offshore marine group whose core competency is in the building of off-shore support vessels such as AHTS and PSV. The Company is among the top 5 AHTS builders globally by number of vessels and its international customers include Mosvold Supply AS and Robert Knutzen Shipholdings. The Company is headquartered in Singapore and owns and operates one of the largest shipbuilding yards in Batam, Indonesia. Its location provides it with a strategic advantage as a result of Singapore’s position as a hub for the regional marine and offshore industry and enables it to tap into a ready supply of workers from Indonesia and management talent, marine and offshore support and expertise from Singapore. www.ottomarine.com Financials Otto’s revenue grew at a compounded annual growth rate of 139.6% per annum, from S$54.7 million in FY2005 to S$314.0 million in FY2007. Over the same period, the profit attributable to their Shareholders grew from S$3.1 million in FY2005 to S$41.9 million in FY2007. Estimated Forecast for FY2008 and FY2009 is S$90m and S$125m respectively based on secured order book till date. Current order book stands at S$1bn includes 4 Platform Supply Vessels (Marin Teknikk design) and 21,000 nett bhp AHTS vessels (Vik-Sandvik design). New order includes a construction vessel contract for Euro 90m to a Norwegian buyer with an option to buy one more. Competitive Strengths • Specialised focus on complex, sophisticated and environmentally friendly offshore support vessels suitable for stringent North Sea exploration • An efficient and strategically located shipyard in Batam (40 ha) and several yards for outsourcing in China (for 8,000 bhp size and below) Strong engineering and technical capabilities and turnkey approach. Only private yard in Asia with Synchro-lift(the other 3 are govt owned). The synchro lift allows up to 13 vessels currently to be built and moved on-shore • Current senior executives are ex-employees from Keppel Marine, SembMarine, Pan United, Keppel FELS (average 34 years experience) Key Offer Statistics 1. Approx Invitation Size: 218m - 236m shares 2. Pre Invitation no. of shares : 975 million shares 3. Indicative Offer Price : SGD$ 0.51 - 0.55 4. Bourse : SGX-ST Main Board 5. Market Capitalization: SGD$640m (approx) 6. Est FY09 PE : 4.8 - 5.1x (based on secured order book) 9. Expected listing : Mid Nov 08 10. Cornerstone Investors : Bangkok Bank Plc $20m Maju Holding $25m Standard Chartered Private Equity $30m .

SINGAPORE -(Dow Jones)- Around 20% of orders for building new dry bulk shipping vessels may be canceled in 2009 as the financial crisis is hitting the shipping industry hard, a shipping industry executive told Dow Jones Newswires on the sidelines of a shipping conference Wednesday. \"A lot of shipowners gave orders for building ships over the past two to three years and paid say 20% of the cost in advance. Now the price at which they had contracted to buy a ship has come down 60%-70% from two- or three-year ago levels, so banks are unwilling to lend the remaining amount to buy the ship,\" said Divay Goel, director and head of operations for Drewry Maritime Services (Asia) Pte Ltd. Drewry is a U.K.-headquartered shipping consultancy firm. Dry bulk cargo refers to commodities such as iron ore, coal, grains and steel. The Baltic Dry Index, which is an indicator of dry bulk freight rates, has fallen 91% since the beginning of 2008. \"The decline in ocean freight rates has got to do with lack of trade finance and the recovery will not start (until) global demand for commodities and credit availability improves,\" said Goel. He said it\'s impossible to say whether current ocean freight rates have hit the bottom, as shipowners are willing to run ships below operating costs, since it doesn\'t make sense to keep ships idle for long periods of time. Even when a recovery occurs, ocean freight rates may not return to the historic highs reached in mid-2008, as the world ocean fleet is going to see massive additions in 2009, despite the likely cancellations, he said. -By Prasenjit Bhattacharya, Dow Jones Newswires; 65 64154 085; prasenjit.bhattacharya@dowjones.com (END) Dow Jones Newswires 11-19-08 0542ET