[ET Net News Agency, 20 July 2018] Morgan Stanley lowered its target price for COSCO
Shipping Holdings (CSH)(01919) to HK$3.75 from HK$4.23, and maintained its "equal-weight"
rating.
The research house said it has shifted its probability weightings towards the bear case
given the recent escalation of US-China trade tensions.
Morgan lowered its net profit forecast 16% for 2018, reflecting weaker than expected
market rates in 1H. Its forecasts are largely unchanged for and 2019 and 2020.
It believes the acquisition of Orient Overseas International Limited (OOIL)(00316) will
significantly increase financial leverage for CSH, as the expected total payment for a 75%
stake in OOIL is over Rmb30bn, compared with CSH's net equity of Rmb21bn as of 2017.
On the positive side, Morgan expects CSH to generate synergies with OOIL after the deal,
thanks to economies of scale. Overall, it thinks CSH's 2019 and 2020 earnings can be
lifted significantly, after the deal. (KL)