YANGZIJIANG SHIPBLDG HLDGS LTD
SGX:BS6
Yangzijiang Shipbuilding - What A Run!
- Up 48% from mid Jul trough (see Yangzijiang share price).
- May continue but upside diminishing.
- Pauses on share buyback.
Stock has done well – up 48% from mid Jul trough
- Having risen 38% since we reiterated our BUY on 8 Aug with our report, “Yangzijiang Shipbuilding - All Aboard!”, the shares of Yangzijiang Shipbuilding (YZJ) are now trading close to our fair value estimate.
- The upward momentum of the stock has been strong, such that YZJ has appreciated close to 48% from its trough in mid Jul over a span of just two and a half months. While the momentum may continue in the near term, the upside potential for the stock is diminishing.
- The stock is trading at 9.5x forward P/E (above 5-year historical mean of 8.8x) and 0.85x P/B (close to 5-year historical mean of 0.9x), which we believe are fair valuations, considering the street is forecasting earnings growth of -3% for 2019, and is forecasting ROE of ~9.2% for the next 12 months.
~ SGinvestors.io ~ Where SG investors share
Share buyback seems to have taken a pause
- We also note that there has also seemed to be a pause relating to the group’s share repurchases – YZJ had started share buy backs in end May and continued till mid Jul with prices ranging from S$0.86- S$0.98/share (refer to table and chart in the PDF report attached for more details).
- The last repurchase was on 17 Jul for 2m shares at S$0.86/share. (See also the latest share buyback by SGX listed companies)
Monitoring steel prices, RMB and new orders
- As highlighted in our reports, the weaker RMB works in YZJ’s favour. However, higher steel prices may weigh on margins. After a significant fall in the first quarter of this year, prices have been creeping up and are now close to this year’s highs (refer to chart in the PDF report attached).
- As for new orders, we continue to believe that the group is likely to hit its full year target of US$1.8b by the end of this year, after securing new orders worth about US$0.98b so far. It has an outstanding order book of US$4.1b which should keep its yard facilities at a healthy utilisation rate up to 2020.
- Meanwhile, we tweak our estimates and our fair value estimate increases from S$1.23 to S$1.32.
- (Downgrade to HOLD).
Low Pei Han CFA
OCBC Investment Research
|
https://www.iocbc.com/
2018-10-03
SGX Stock
Analyst Report
1.32
Up
1.230
