Yangzijiang Shipbuilding (YZJSGD SP) - DBS Research 2017-09-04: Raising Equity For Future M&As

Yangzijiang Shipbuilding (YZJSGD SP) - DBS Vickers 2017-09-04: Raising Equity For Future M&As YANGZIJIANG SHIPBLDG HLDGS LTD BS6.SI

Yangzijiang Shipbuilding (YZJSGD SP) - Raising Equity For Future M&As

  • Raising c.S$209m through private placement of 137m new shares at S$1.53 per share.
  • Implies valuation of 1.18x book; represents 4% discount to weighted average price on 29 Aug.
  • Potential acquisitions – remaining 20% stake in Xinfu yard, and those relating to clean energy and military vessels.
  • Reiterate BUY; TP unchanged at S$1.70.

What’s new 

  • Yangzijiang is placing 137m new shares to institutional investors at S$1.53 per share.

What’s the impact? 

  • The placement price seems reasonable, representing 4.07% discount to the weighted average trading price on 29 Aug of S$1.5949 per share and 1.18x FY17 book (based on S$1.30 per share). Post placement, share capital is enlarged by 3.6% to 3,968.8m shares while book value per share is lifted to S$1.32.
  • Yangzijiang will raise net proceeds of approx. S$209m. Up to 50% of the proceeds will be used to fund future M&As while the remaining will be utilised for general working capital and debt repayment.
  • We believe the fund raising is a harbinger for M&As, which in our view include: 
    1. The purchase of the remaining 20% stake in Xinfu shipyard which we estimate would contribute an incremental S$20-25m to bottomline;
    2. The acquisition of technology that could strengthen Yangzijiang capability and franchise in clean energy vessels; 
    3. Partnership with a SOE yard that will pave the way for high margin military vessel contracts, tapping on Chinese yards’ consolidation and government’s mixed ownership policy.
  • Furthermore, we continue to believe the possibility of duallisting in Hong Kong should not be ruled out, in the event of sizeable acquisitions that require demand for larger scale fund raising exercises.


  • Maintain BUY on Yangzijiang. Our SOTP-based TP of S$1.70 is largely intact given that the marginal dilution is offset by the higher net cash on hand. 
  • As the largest and most cost-efficient private shipbuilder in China, Yangzijiang Shipbuilding (Yangzijiang) is well-positioned to ride the anticipated shipping and shipbuilding recovery. 
  • In addition to contract flow, near term strategic and earnings accretive acquisitions would also call for re-rating on the stock.

Pei Hwa Ho DBS Vickers | http://www.dbsvickers.com/ 2017-09-04
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.700 Same 1.700