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Celebration time: Cosco group president and chief executive officer Capt Wei Jiafu, Transport Minister Yeo Cheow Tong and Cosco Investment president Ji Hai Sheng at a dinner to mark the 10th anniversary of the founding of Cosco Investment (Singapore) Ltd

GOOD returns and good relationships - these are the two key factors that have characterised Cosco Investment's decade-long presence in Singapore.

A subsidiary of the Beijing-based China Ocean Shipping Group Companies (Cosco Group), Cosco Investment was listed in Singapore to tap into the resources of South-east Asia. The group's sojourn began on Oct 5, 1993, when it acquired Singapore-listed Sun Corporation, and renamed it Cosco Investment (Singapore). It was its first listed subsidiary outside China.

The next logical step for Cosco Group, in its quest to establish itself as a world leader in shipping and logistics, was to expand into this region. Singapore, with its well-established financial system, and strong and stable government, was the obvious choice.

The company listed with a market capitalisation of S$73 million and assets worth S$50.7 million. In the last 10 years, Cosco Investment has grown by leaps and bounds, increasing its market capitalisation to S$210 million as at June 30, 2003. Assets were worth S$187 million at end-2002.

Since its listing, Cosco Investment has grown from a single office in Singapore to a network of 15 offices across South-east Asia.

A key factor in its success is its continued focus on maximising returns. By focusing on its core business of shipping and shipping-related activities, Cosco Investment has been able to fully maximise its resources.

This was not always the case. When Cosco Investment first began its operations, it had its fingers in many pies, including shipping, general trading and property. However, in recent years, the company identified a need to trim its operations, so as to remain strategically focused and competitive.

Areas outside of its core strengths are being slowly divested, in order to free up resources that could be channelled to developing the core businesses. Businesses with high risks but low profits are those targeted for divestment.

Divestment of Cosco Investment's non-core businesses began in January last year with the successful sale of companies such as Cosco Trading (Singapore), which are low-margin and under-performing.

The next stage of its divestment strategy was completed in December 2002 when it divested two property subsidiaries in Shanghai - Johnston Investment Pte Ltd and Calzona Pte Ltd. In February 2003, Cosco Investment announced the divestment of Revo Technologies as it was no longer consistent with the group's core business. Cosco Investment's management anticipates the need to keep up with China's rapid growth over the next five years in order to capitalise on the new opportunities. The company has expanded into sectors such as bulk shipping, ship agency, and ship repair and refitting.

Ship repair and refitting, in particular, have been identified as major new areas for the company. Resources freed up as a result of divestment activities have been channelled towards strategic acquisitions in this area.

Last year, Cosco Investment acquired 50 per cent of Cosco Nantong Marine Engineering Co, which was later renamed Cosco Nantong Shipyard Co. The market welcomed the acquisition which brought significant returns for the company. For the financial year ended 2002, Cosco Nantong reported a net profit of US$2.29 million, equivalent to an investment return of more than 18 per cent.

Expanding further into the lucrative area of ship repair and refitting in China, Cosco Investment shareholders recently voted to purchase a 40 per cent stake in Cosco Dalian Marine Engineering Co, the third largest ship repair yard in China.

This acquisition will further reinforce Cosco Investment as a prominent player in China's ship repair industry. The purchase for Cosco Dalian will be completed by this month, and is expected to contribute approximately US$1 million in profit for the second-half of this year.

Along with its expansion into China's promising ship repair industry, Cosco Investment has also devoted significant resources to building up its fleet of bulk carriers. This initiative is currently going strong with the addition of new bulk carrier Cos Knight in November last year, and Cos Lucky in April this year. Cosco Investment's fleet now stands at 14 bulk carriers with a total deadweight tonnage in excess of 700,000 dwt. The company's fleet contributed a profit of US$3.24 million in 2002. There are plans to further expand the fleet.

Another important factor that has contributed to the company's success is the cultivation of strong partners in Singapore. In its 10 years here, Cosco Investment has successfully established an excellent working relationship with the Singapore Government and government-related entities such as Temasek Holdings, PSA Corporation, banks and other financial institutions.

In 1993, Cosco Investment's shipping business also got a strong boost from the Singapore Government when its wholly-owned shipping subsidiary, Cosco (Singapore) Pte Ltd, was designated as an Approved International Shipping Enterprise. The AIS scheme allows the income from qualifying shipping corporations to be tax-exempted, thus encouraging the setting up of shipping businesses in Singapore.

Going forward, the company foresees that the world economy faces immense challenges. Though the war in Iraq has ended, the Sars virus contained, and the US economy showing signs of recovery, uncertainties remain.

For Cosco Investment, it will continue its restructuring efforts. The company is keen to acquire more ship repair yards in China to expand its presence in this lucrative and fast-growing market. Logistics and port management are also areas that are being seriously considered. These industries provide opportunities for high growth and high returns, especially in China and its south-east regions.

The company will also leverage on the resources and the global network of its parent company, Cosco Group, for further development and assistance in its strategic alliances and acquisitions exercises.

Focusing on returns and forging strong relationships has taken the company thus far. The road ahead for Cosco Investment still shines with opportunity.

The Business Times