YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)
Yangzijiang Shipbuilding - Increased Transparency Post Potential Investments Arm Spin-off
- EGM for proposed spin-off of investments arm on 18 April 2022.
- Potential re-rating of core shipbuilding business subsequently with a cleaner entity.
- ESG rating has remained constant for past few years.
EGM for proposed spin-off on 18 April 2022
- We attended a management briefing on Yangzijiang Financial Holding (YZJFN, SGX:YF8), which is the investment business of the Yangzijiang Shipbuilding (SGX:BS6) where there are plans for a spin-off on the mainboard of the SGX by way of an introduction.
- To recap, if approved, shareholders of Yangzijiang Shipbuilding will obtain shares of Yangzijiang Financial Holding by way of a dividend in specie. An EGM to seek the approval of shareholders for the proposed spin-off is scheduled to be on 18 April 2022.
Potential re-rating of core shipbuilding business subsequently
- Increased transparency on Yangzijiang Shipbuilding’s investments arm would result from the spin-off, especially the value that the market accords on the investments division subsequently. The market would probably look to the valuations that Chinese banks are trading at, while keeping in mind that larger Chinese banks may have a more developed system of credit controls and evaluation.
- As for the core shipbuilding business left in Yangzijiang Shipbuilding, it is possible for it to see some re-rating post the spin-off, since this removes an overhang for the stock, leaving for a cleaner, shipbuilding-focused entity.
Yards generally full
- Indeed, the shipbuilding arm is seeing a recovery in the industry, and 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.
Issued S$50m of unsecured convertible bonds
- Recall that Yangzijiang Shipbuilding also earlier 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$25m 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.
- The net asset value per share (NAV/share) of Yangzijiang Shipbuilding prior to the spin-off is RMB9.16 which translates to about S$1.96, and this is expected to fall to about S$0.87 after the spin-off. Based on the closing Yangzijiang's Share Price of S$1.61 on 11 April 2022, this implies that the stock is trading at about 0.8x P/B.
- See
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2022-04-12
SGX Stock
Analyst Report
1.750
UP
1.540
