Yangzijiang Shipbuilding - DBS Research 2020-03-17: Tiger Contracts In The Bag

YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)

Yangzijiang Shipbuilding - Tiger Contracts In The Bag

Yangzijiang Shipbuilding (SGX:BS6) secured orders to build two units of 14k TEU containerships worth US$230m.
Comes with options to build eight similar units worth up to US$920m to be exercised in 2020.
Lift YTD wins to US$334m, or 17% of full year target.
Reiterate BUY; Target Price S$1.50.

As highlighted in our previous report Yangzijiang Shipbuilding - DBS Research 2020-03-06: Don’t Miss The Boat!, Yangzijiang Shipbuilding announced that it has secured firm contracts to build two units of 14k TEU dual-fuel containerships worth US$115m each from Tiger Group. It also comes with options to build up to eight similar units (two units more than reported number on newswire earlier), exercisable within 2020.
Scheduled for delivery by mid-2022, the two firm orders worth US$230m lifts YTD wins to US$334m, forming 17% of our full year order wins assumption of US$2bn.
We could expect up to US$920m incremental orders from the exercise of options for eight similar units. Assuming all options are exercised this year, it would contribute to nearly half of Yangzijiang Shipbuilding’s full year order wins target. However, we might not see that coming through soon given the current macro uncertainties.

While Yangzijiang's share price has dropped 6% since our last report advocating investors to bottom-fish, it has outperformed the Straits Times Index (STI) by ~12%. Valuation remains compelling at 2SD (standard deviation) below 5-year average price/book value (P/Bv) of 0.5x against decent 8% return on equity (ROE) and 5% dividend yield.
Reiterate BUY and target price S$1.50 (SOTP)-based, translating to 0.9x P/Bv).
See Yangzijiang Share Price; Yangzijiang Target Price; Yangzijiang Analyst Reports; Yangzijiang Dividend History; Yangzijiang Announcements; Yangzijiang Latest News.
Potential catalysts include the exercise of Tiger’s containership options, stronger contract flows and progress in the liquefied natural gas (LNG) carrier space through its joint venture (JV) partner Mitsui.

Pei Hwa HO DBS Group Research | https://www.dbsvickers.com/ 2020-03-17

SGX Stock Analyst Report BUY MAINTAIN BUY 1.500 SAME 1.500