Yangzijiang Shipbuilding - OCBC Investment 2022-03-04: Getting More Selective On Orders

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YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)

Yangzijiang Shipbuilding - Getting More Selective On Orders

• Yangzijiang Shipbuilding's yards are full till FY24.
• Spin-off of debt-investments arm with entity to list on SGX.
• ESG rating has remained constant for past few years.

47% growth in YZJ's net profit in FY21

• Yangzijiang Shipbuilding (YZJ, SGX:BS6)’s net profit of RMB3.7b in FY21 was in line with our expectations. Shipbuilding gross margin fell to 11% in 2H21 compared to 13.5% in 1H21 with the execution of lower priced contracts, higher steel costs and FX movements. However, there was a RMB627m fair value gain on derivative financial instruments, and RMB205m reversal of allowance for losses recognised on onerous contracts in 2H21.
• A dividend of S$0.05/share was declared.

Looking out for the investments arm spin-off

• What the market is focusing however, is on Yangzijiang Shipbuilding’s plans to spin off its investments segment through a separate listing on SGX mainboard – application has been made on February 2022, and post spin-off, Yangzijiang Shipbuilding will be a pure-play shipbuilding company, with a focus on shipbuilding, shipping and green energy.
• Shareholders of Yangzijiang Shipbuilding will be entitled to a dividend-in-specie of the financial segment spin-off subsequently.

Yards generally full

• As for the shipbuilding side, Yangzijiang Shipbuilding has 157 vessels worth US$8.5b in its orderbook. 12 new vessel orders were secured in 2H21 as the group’s yards are full till FY24 and management remains selective on orders.

Issues S$50m of unsecured convertible bonds

• Meanwhile, Yangzijiang Shipbuilding also announced that it has entered into separate agreements to issue S$50m of Unsecured Convertible Bonds to EDB Investments Pte Ltd and Alexandrian Worldwide Incorporated. Each of the two strategic investors shall subscribe for S$25 million bonds (maturity 12 months) which will be mandatorily converted into ordinary shares upon receiving necessary approvals. The conversion price for the bonds is S$1.345/share.
• See
  • Yangzijiang's Share Price,
  • Yangzijiang's Target Price,
  • Yangzijiang's Analyst Reports,
  • Yangzijiang's Dividend History,
  • Yangzijiang's Announcements,
  • Yangzijiang's Latest News.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-03-04

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.540 DOWN 1.640