Cosco Shipping launches takeover of Cogent Holdings

FRESH from having divested its shipyard business, Cosco Shipping International has launched a S$490 million cash buyout of Cogent Holdings at S$1.02 a pop.

It also plans to buy Indonesian shipping logistics company PT Ocean Global for S$14 million, also in a cash deal.

These moves by one of the big China plays on the Singapore Exchange, announced separately on Friday alongside its third-quarter earnings, confirm analysts' speculation that the logistics business could be Cosco's new focus.

Its voluntary conditional buyout of Singapore-listed Cogent at a price tag some 31/2 times the net tangible asset per share of 29.8 Singapore cents as at end-June 2017, is premised on its identifying the demand for logistical services in Singapore and Malaysia, where - Cosco says - Cogent has a strong presence.

The offer also offers a 5.2 per cent upside for shareholders to exit, based on the last transacted price of 97 Singapore cents on Thursday.

The counter was last traded at 99 Singapore cents on Friday, right before a trading halt pending the announcement.

Phillip Securities Research analyst Richard Leow is disappointed by the offer. Firstly, it is because it is lower than his S$1.12 target price for Cogent.

Secondly, he is "surprised" that the offer, which values Cogent at 14.9 price-to-earnings (trailing 12 months) multiple is "much lower" than the recent buyout offer for another company with a similar business - Poh Tiong Choon Logistics, at 23 times.

He further noted that Cogent has yet to report its results for the three months to September.

The conditional offer, which Cosco will fund with internal resources, has already locked in an irrevocable undertaking from four individuals; they are Cogent's executive chairman and his wife, the chief executive and the managing director, who collectively hold 84.33 per cent of the company.

Cosco's financial adviser for the deal, Bank of China, will extend a S$350 million loan facility to part fund the takeover.

Cosco said that its proposed acquisition of a 40 per cent interest in PT Ocean Global will enable it to own a profitable business that is complementary, and also provides an opportunity to expand further into Southeast Asia's logistics sector.

It signed a share sale-and-purchase agreement with sister company Cosco Shipping (South-east Asia), which is wholly-owned by China Cosco Shipping Corp and already owns 49 per cent of PT Ocean Global.

Cosco's controlling shareholder, China Ocean Shipping (Group) Company, is wholly-owned by shipping giant China Cosco, so the proposed deal is deemed an interested-party transaction.

Cosco Shipping also reported a net profit of S$24.8 million for the three months to September, a turnaround from a loss of S$102.3 million a year ago.

Revenue fell 29 per cent to S$6.99 million from S$9.9 million owing to a fall in shipping revenue from a smaller fleet of bulk carriers. Currently, the group's dry-bulk shipping fleet comprises four Handymax carriers, following its scrapping of six bulk carriers by the end of September.

Earnings per share stood at 1.10 Singapore cents per share from a loss per share of 4.57 Singapore cents a year ago. Trading in the shares of Cosco Shipping was halted mid-Friday, pending the offer announcement; the counter last traded at 30 Singapore cents.