Yangzijiang Shipbuilding - OCBC Investment 2019-03-04: This Ship Has Brought You To Places

YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)

Yangzijiang Shipbuilding - This Ship Has Brought You To Places

YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6) reported a 22% y-o-y fall in revenue but saw an 84% rise in net profit to RMB1.2b in 4Q18, bringing full year net profit to RMB3.6b which is a 23% increase compared to FY17.

Results beat ours and the street’s expectations, aided by RMB494m of other income in 4Q18 as well as RMB344m of forex gains. There was also reversal of impairment loss of RMB99m on other investment at amortised costs and RMB91m on loans to non-related parties (microfinance) in 4Q18.

The dry bulk shipping market is currently rather weak, with the Baltic Dry Index at about 658 points vs. 1774 in Aug last year and an average of 1353 for 2018. The containership market is also soft, partly due to US-China trade tensions.
For Yangzijiang Shipbuilding, the group is pivoting from bulkers and containers (which used to be its bread and butter) to tankers and LNG carriers. Though the group has not received any domestic enquiries for LNG carriers, this may change in 2019.
In 2018, Yangzijiang Shipbuilding secured new orders of US$1.46b in 2018, short of its earlier US$2b target.
Looking ahead at 2019, the group is sticking to its US$2b target as well.

Yangzijiang Shipbuilding has declared a dividend of 5 S cents, higher than 4.5 S cents in FY17. Its stock has also performed extremely well since mid last year, for it is up about 70% from mid Jul.
From its trough in Jul 2018, the stock appreciated by about 51% before we downgraded it to HOLD with our 3 Oct 2018 report, “Yangzijiang Shipbuilding - What A Run!” We upgraded it to BUY with our 8 Nov 2018 report “Yangzijiang Shipbuilding - Come Onboard Again”, and the stock rose another 12%, based on 1 Mar’s closing.
At current levels, Yangzijiang Shipbuilding is trading at about 9x forward P/E and 0.9x P/B, and we think most of its positives have been priced in. We fine-tune our estimates and our Fair Value rises from S$1.41 to S$1.44.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2019-03-04

SGX Stock Analyst Report HOLD DOWNGRADE BUY 1.44 UP 1.410