YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)
Yangzijiang Shipbuilding - Not Immune To Covid-19
- Results within expectations
- Prolonged COVID-19 a key risk
- Outstanding order book of US$2.9b
Flattish net profit in FY19; within expectations
- Yangzijiang Shipbuilding (SGX:BS6) reported a 2% rise in revenue and a 1% increase in net profit to FY19, which was in line with our expectations. This was despite a challenging shipbuilding market in 2019.
- Amidst US-China trade tensions and the IMO rules on sulphur emissions, most of the shipowners cut or postponed their investment in new vessels.
Outstanding order book of US$2.9b
- In 2019, the group secured new orders for 21 vessels worth a total of US$830m, such that its outstanding order book stood at US$2.9b as at end 2019. This will keep the group’s yard facilities at a healthy utilization rate up to 2021 and provide a stable revenue stream for at least the next 1.5 years.
- YTD, Yangzijiang Shipbuilding has secured new contracts for four vessels worth US$104m.
Impact of COVID-19
- The group’s January operations were not impacted by COVID-19 as yard utilization is normally low due to Chinese New Year celebrations. However, restrictions imposed by the local government for returning sub-contractors have resulted in a workforce level of only about 30% in February, and the impact may continue to be felt in March. It is estimated that at least 80% of the workforce has to return by March for the group to hit its target delivery of 51 vessels this year.
- Meanwhile, there are also delays in the shipbuilding supply chain across the region. We adjust our estimates lower to factor in more conservative assumptions.
- For this year, Yangzijiang Shipbuilding still targets US$2b of new orders, seeing good demand for large containerships, but we currently assume US$1.3b of new order wins.
4.5 S cents dividend in FY19
- Yangzijiang Shipbuilding has declared a final dividend per share of 4.5 S cents for FY19, compared to 5.0 S cents for FY18.
- Looking ahead, a key risk is a prolonged impact from COVID-19, impacting shipbuilding production. Taking this into account and the correspondingly weaker economic outlook, we adjust our sum-of-the-parts based fair value estimate from S$1.39 to S$1.20.
- See Yangzijiang Share Price; Yangzijiang Target Price; Yangzijiang Analyst Reports; Yangzijiang Dividend History; Yangzijiang Announcements; Yangzijiang Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-03-02
SGX Stock
Analyst Report
1.20
DOWN
1.390
