Yangzijiang Shipbuilding - CGS-CIMB Research 2019-12-09: Huge Discount To Singapore Yards

YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6) | SGinvestors.io YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)

Yangzijiang Shipbuilding - Huge Discount To Singapore Yards

  • YANGZIJIANG SHIPBUILDING (SGX:BS6)’s order wins YTD totalled US$696m, with 16 vessels on order. Order book stood at US$3.18bn for 83 vessels.
  • Yangzijiang is trading at 5-year trough of 0.6x CY19F P/BV, a 50% discount to Singapore yards.
  • Catalysts are stronger orders and the chairman’s return to duty.
  • Maintain ADD and Target Price of S$1.45, based on SOP of 1x CY19F HTM and shipbuilding B/V.



IMO 2020 hope for shipbuilding order

  • We could see more orders in 2020 when ship owners are clearer on the implementation of the IMO 2020 emission regulations. We believe that higher freight rates as a result of IMO 2020 could also spur the shipbuilding order momentum.
  • YTD order wins totalled US$696m with 16 vessels on order. Order book stood at US$3.18bn for 83 vessels. We have factored in US$1.4bn in new orders for FY20F.


Margin lower but still have buffer from provisions write-back

  • In its recent 3Q19 earnings, Yangzijiang recorded lower shipbuilding gross margins of 14% (vs. 2Q19’s 18%). Going forward, we believe that shipbuilding margins could be in the range of 14-16%, utilising the Rmb654m balance of provisions for onerous contracts in the balance sheet.


Potential for higher dividend

  • Management had scaled back on investments in assets held to maturity (HTM). Therefore, cash on hand rose to Rmb9.2bn as at 9M19, or c. S$0.46 per share.
  • With little capex required, we believe there is a potential for higher dividends. Our DPS of Rmb0.20 is conservative.


Maintain ADD and Target Price of S$1.45






LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2019-12-09
SGX Stock Analyst Report ADD MAINTAIN ADD 1.450 SAME 1.450



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