BROKER CALL China COSCO kept 'buy' after earnings estimate hike - Goldman Sachs

HONG KONG (XFN-ASIA) - Goldman Sachs reiterated a 'buy' call on China COSCO Holdings' Hong Kong-listed shares with a target price of 30 hkd after the operator of Asia's largest container line raised its full-year earnings estimate.

China COSCO said it has raised its 2007 net profit forecast by 49.1 percent to 18.2 bln yuan from the 12.2 bln estimated earlier in September due to better-than-expected revenue from its international shipping operations. 'The news affirms our above-consensus 2007 earnings estimate of 20.2 bln yuan,' Goldman Sachs said.

Goldman sees two near-term share price catalysts, namely better-than-expected results to be released at the end of March and possible earlier-than-expected completion of iron ore contract negotiations. 'We believe there is still upside to the company's revised earnings guidance for 2007. This does not appear to be reflected in current valuations,' the investment bank said.

It also noted that China COSCO will likely benifit from the robust iron ore marine transportation business after it recently completed dry bulk shipping asset acquisitions.

It noted that the market consensus is for iron ore suppliers and buyers to complete their contract price negotiation for next year by the second quarter of 2008. 'We expect 2008 to be a strong year for dry bulk, but highlight our concerns of possible oversupply in 2009, which could cap share performance,' Goldman Sachs said.

China COSCO shares today closed up 0.45 hkd or 2.03 pct at 22.60 hkd.

( 1 usd = 7.80 hkd)

Source:RamblerNews