YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)
Yangzijiang Shipbuilding - Going Back To Its Roots
- Securing more orders as industry recovers.
- Conducting strategic review of its debt investments arm.
- Likely to focus on expanding core shipbuilding business.
Yangzijiang Shipbuilding reported healthy 1H21 results
- Yangzijiang Shipbuilding (SGX:BS6) reported a 20% fall in revenue to RMB6.6b but registered a 39% increase in net profit attributed to shareholders of RMB1.6b, bolstered by a RMB166m reversal of impairment loss on financial assets and other gains. Core shipbuilding margin was 14% in 1H21 compared to 16% in 1H20, due to rising raw material costs and strengthening of RMB against the US$.
Outstanding order book increases to US$8.65b
- Year-to-date, Yangzijiang Shipbuilding won new orders of US$6.67b comprising 112 vessels; many were containerships. This is the group’s largest order haul in its history, and brought its order book to US$8.65b compared to US$3.1b as at and 2020.
- Recall that in 2020, Yangzijiang Shipbuilding secured new orders of 54 vessels worth a total of US$1.8b, which was about double that of 2019. As mentioned in one of our earlier reports, Yangzijiang Shipbuilding - OCBC Investment 2021-03-04: Higher Tides, order win momentum has been encouraging as demand and orders placed for containerships surged on the back of a global container shortage and multi-year high spot container freight rates.
Conducting strategic review of its debt investment portfolio
- Yangzijiang Shipbuilding also announced that it is in the preliminary phase of conducting a strategic review of its debt investment portfolio to focus solely on the expansion of its core shipbuilding business.
- As at end Jun 2021, Yangzijiang Shipbuilding had RMB16.6b of debt investments at amortised costs (held-to-maturity investments) as at end March, which accounted for about 35% of total assets. The group saw RMB904m of interest income in 1H21 from the Investment segment. Should Yangzijiang Shipbuilding spin off (potentially on the A-share market) or reduce this segment significantly, this could alleviate some investors’ concerns on the financing business, but this would also mean a reduction in recurring income in the meantime.
Await details on the investments portfolio
- With improving prospects in the shipbuilding market as the global economy recovers, we raise our fair value estimate for Yangzijiang Shipbuilding from S$1.45 to S$1.64 as well, while awaiting clarity on the plans for the investments portfolio.
- For 2022, Yangzijiang Shipbuilding is targeting new orders worth about US$2b. Yangzijiang Shipbuilding will also adopt half-yearly financial reporting from the second half of this year.
- See
ESG updates
- Yangzijiang Shipbuilding scores relatively lower for Yangzijiang Shipbuilding fall short of best practice.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2021-08-10
SGX Stock
Analyst Report
1.64
UP
1.450
