Sinking Cosco awaits lifesaving restructuring deal

Losses swelled to $82m in Q3.

The only hope on the horizon for floundering shipping and logistics services supplier company Cosco is a large-scale restructuring deal involving its parent group.

Analysts at DBS argue that after Cosco's dismal third quarter results, a privatisation by parent China Ocean Shipping (Group) Company (COSCO Group) is the only initiative that could drive the company’s share price upwards.

“With Cosco facing challenges from multiple fronts and its share price falling to its lowest levels in over 10 years, if these may provide impetus for privatisation by its parent, who may hold a longer-term view of Cosco’s potential,” DBS said in a report.

In August this year, it was revealed that Cosco Group has been in the process of negotiating a significant transaction with China Shipping Group, which involves the asset consolidation of business segments of COSCO Group’s subsidiaries and associated companies. Trading of Cosco’s shares has been suspended since then.

“The privatisation would help to streamline Cosco’s cost structure and allow it to enjoy SOE benefits. This would also pave the way for mergers with other SOE yards, in our view,” DBS noted.