Here's the bright spot amid Cosco's disappointing 4Q13 results

Order pipeline remains promising, says DBS.

Despite a flat performance from Cosco in the last quarter of 2013, which saw net profit sink to S$4.6m, the company can look forward to a healthy potential order pipeline.

Gross orderbook inched up from US$7.2bn last quarter to US$7.8bn currently, with Cosco having secured orders of US$117m YTD, or 5% of DBS's assumption of US$2.5bn (vs US$3bn last year) for this year.

"Despite the slow start to the year, potential order pipeline is rather promising," said DBS.

Order pipeline is comprised of: 1) two drillships worth US$650-700m each with X-Drill; 2) Options for 3 jackup rig orders, built to LeTourneau Super 116E design, from India-based contractor Deepwater Drilling (through associate Dynamic Group) worth approximately US$180m each; and 3) a high-specification semi-submersible for East Sunrise Group worth US$650-700m (competing with Dalian Shipbuilding).

Still, DBS cautions that while order win momentum has been encouraging, "we believe the spotlight stays on earnings delivery and potential financial impact from the drillship saga in the near term."

"We are unable to ascertain the potential cost overruns and liability of the drillship project. The snowballing provision of cost overruns from S$34m in 3Q to S$51m in 4Q raises a red flag on execution and profitability of the new offshore projects," DBS added.

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