News in brief:
Hu An Cable Holdings: Seeing its share price drift down with the market to as low as 21 cents a week ago, Hu An Cable is seeking shareholders' approval for a share buyback mandate at an extraordinary general meeting to be held 16 November.
Announcing this last night, Hu An Cable added that it has secured a RMB13.0 million contract from Guodian Hefeng Wind Power Development Co., Ltd., a wholly-owned subsidiary of one of China’s top 5 power producers.
The contract is for Hu An Cable to continue supplying power cables to Daqingbei Wind Power Project Phase 2 in Huachuan County, Heilongjiang Province.
With the contract win, the Group’s orders from the wind power sector for the year-to-date have reached RMB102.0 million.
The total number of wind farm projects involved by Hu An Cable this year stood at 35 projects as of early October, and has surpassed the Group’s target of 25 projects. Hu An is one of the top 10 wire and cable manufacturers in the PRC.
Mr. Dai Zhi Xiang, CEO & Executive Chairman of Hu An Cable, said, “We are pleased to enjoy priority in our customers’ vendor selection for its subsequent contracts, thanks to our commitment to product technology innovation, reliable product quality and delivery quantity.”
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Yangzijiang Shipbuilding: Yesterday it announced that it is “confident to deliver not less than 30% growth in net profit attributable to equity holders of the Group in the upcoming 9 months results announcement.”
In 9M2010 YZJ earned CNY2.12b, which means its minimum 9M2011 profits would be CNY2.76b.
AmFraser Securities said that considering that YZJ earned CNY2.96b last year, YZJ is definitely on track to make record profits this year.
For the full year, AmFraser’s estimates are slightly rosier than a 30% increase. Its analyst, Lee Yue Jer, forecasts PATMI growth of 35% full-year for a record profit of CNY4b, equivalent to about S$0.207 per share.
In yesterday’s announcement, YZJ contrasted the value of its microfinance assets with its market cap (<2%) and NTA (<3%).
AmFraser has previously chosen the bottom line as a reference point— CNY248m vs this year’s PATMI of CNY4b, or merely a 6% onetime risk to profits. “The market selldown of over 20% was a clear overreaction which led to our call to average down,” said Mr Lee.
Furthermore, these microfinance companies are “profitable and operations remain healthy”. Even so, YZJ said it has made provisions against unforeseeable losses, which further reduces the probability of any negative bottom-line impact.
As for its held-to-maturity (HTM) assets, AmFraser highlighted that any defaults do not immediately mean losses, unlike for a regular bank since these loans are heavily collateralized with Collateral/Loan Value coverage ratios of more than 2x.
“We calculated that using conservative assumptions the Shanghai Composite Index would have to fall to 1,300 points before YZJ began booking losses. Considering that in the GFC the index fell to “merely” 1,700, we see very low loss probabilities,” said Mr Lee.
YZJ management has stated that there have been no defaults since the 2008 global financial crisis.
In the meantime, the HTM assets are generating healthy profits and contributing between 9-15% of the dividend, which this year AmFraser expects to be 6.2 cents a share.
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