Cosco Corporation third-quarter earnings vulnerable to reversal

Terminated drillship contract may adjust profits.

Research firm DBS expects Cosco Corporation to post a recurring net profit of S$16m when it releases its 3Q13 results on November 5, but a possible reversal and provision for drillship contract termination could shave a bit of profit from its bottom line.

"We reckon earnings could be affected by the potential reversal of profits previously recognised on the project (but likely to be minimal), and adjustment/provision for the termination of drillship contract," said DBS.

DBS also cast doubt on an immediate earnings recovery for Cosco Corporation despite its strong efforts to become a top offshore yard in China.

"While we are optimistic that Cosco will emerge as a competitive offshore yard in China in another cycle or two as it gains experience in various offshore products, earnings recovery will take time as it moves up the value chain gradually," reckoned the research firm.