Pros and cons of Cosco's proposed asset sale

THE shipping, offshore maritime, oil and gas sectors have been suffering the effects of a very daunting market conditions amidst an unprecedented and protracted industry downturn. The effect of the downturn has seen billions wiped out from the market capitalisation of these companies. Some of these companies, once the darlings of market, much to the disappointment of investors have now sought court protection. While many are pursuing efforts to restructure their debt and improve their balance sheets, a few have already gone into or commenced liquidation. The effect of a liquidation destabilises the confidence of investors.

While global trade and general economic environment is seen improving, companies in this sector are still not out of the woods. As companies begin restructuring and improving their balance sheets, recovery for many of them remains far off.

Cosco Shipping International (Singapore) or Cosco, listed on the SGX, has also felt the effects of the downturn in the industry. Its shipyards have had to contend with fewer orders and lower contract prices. This has resulted in a loss of S$466.5 million for FY 2016 and S$78.9 million for Q1 2017. The company's outlook is that it is not expected to improve with continued challenging business and operating conditions, which may even worsen.