Saturday, March 7, 2020

Cosco 517

This is my second overseas investment. However, it is my maiden investment into Hong Kong exchange, my first is GA pac,which is also in Hong Kong and both were purchase within the same fortnight. 

I shall let pictures tell the story of why I bought. Maybe u can pinpoint the main reason why I think it's a good deal.

This is the story or business part. 

The numbers part is below. Which numbers do u think catch my attention?

....... ......

The numbers is interest income or finance income's proportion to operating income, and u can understand the risk of this business. Unlike YZJ whose finance income come from riskier HTM investment, 517 income come from bank deposits.

Shipping is a scary industry, but 517 is the back support service of this industry, sparing it from the vaguarlity of containers rate, port utilization, etc.

Also, one way to play this company is waiting for a special dividends when the holding parent need cash to help other brothers and sister. 

Yield is respectable, decent. U can't find a 6% thereabout counter that is net cash in Singapore.

Dividend policy is minimum 50 percent payout, although they have been paying 75 percent for the recent years. If they go back to 50 percent, yield will not be that attractive. 

The oil trading division has run into troubles recently but they manage it without big impact to bottom.line. Topline is affected because oil supply is low margin high turnover kind of business. 

I am no insider for shipping industry. But if u see the oversupply of ships, bulk etc, it has been around for quite a while and 2017 is a very short respite for new build orders. The bottom will turn sooner or later, although it is likely later due to trade disruption from US China spat and Convid 19. China has promise to buy more from US if this covid 19 has not draw a spanner to this arrangement. The new sulphur threshold for marine fuel might accelerate the decommission of older ships earlier once the threshold is reinforced more rigourously. 



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