DBS Vickers keeps $1.45 target for Yangzijiang, 'the most competitive and profitable shipyard in China'
Analyst: Ho Pei Hwa (left)Yangzijiang announced that it has secured 18 new contracts worth US$815m comprising:
i) thirteen 82k DWT bulk carriers
ii) one 208k DWT bulk carrier
iii) four 10k TEU containerships
YTD wins lifted to US$1.07bn; orderbook rises to US$4.9bn. Including the above contracts, YZJ has secured a total of 26 shipbuilding contracts with an aggregate value of US$1.07 bn. We estimate that this would lift its orderbook from US$4.6bn to US$4.9bn. Order wins have been stronger than expected, forming 54% of management's guidance of not more than US$2bn shipbuilding contracts this year given that the yard is already full till 2016. Revenue coverage ratio is currently well supported at 2.5x and it may be too risky for this to rise beyond 3x given the lower visibility on material cost and forex.
Newbuild prices increased for Seaspan orders; decent margins. We understand that the majority of the 82k dwt bulk carrier orders would fill up additional slots that will become available in 2015 and 2016, as a result of efficiency improvement steps undertaken. Another positive note is that Yangzijiang has managed to increase the price of 10k TEU containerships to Seaspan by 3%, a midpoint of the previous option price and current market price. Gross margins for these new contracts are expected to be in the range of 15-20%.
One of the best Chinese shipyards. We favour Yangzijiang as the most competitive and profitable shipyard in China on the back of its strong execution, industry foresight and ability to move up the value chain more quickly than peers. The group is well-positioned to clinch higher value-add projects like mega containerships, mid-water semi-submersibles, LPG & LNG carriers. Valuation is undemanding at 1x P/BV in spite of its high ROE of 15% and 4-5% dividend yield. Maintain BUY and SOTP-based TP of S$1.45.
Recent story: YANGZIJIANG -- Stock again oversold, target raised to $1.58
OSK-DMG highlights that SingLand is trading at 34% discount to RNAV
 Analyst: Goh Han Peng (left)Silchester International Investors (Silchester), the second largest shareholder of SingLand, trimmed down its stake from 8.16% to 4.95% after offloading 13.25m SingLand shares yesterday at SGD9.50 per share. As a result, it ceases to be a substantial shareholder of SingLand (defined as any shareholder with > 5% stake). With its move, free float of SingLand has increased from 11% to 19%, removing the threat of any potential delisting had UIC been able to garner 1% of the free float from public shareholders. Silchester had earlier highlighted that it deemed UIC’s offer, at a 33% discount to net assets, too low and it intended to sell down its stake to below 5% to protect its clients’ interests in the absence of a higher offer from UIC. UIC’s offer is now doomed to fail with the increased free float, unless it raises its offer. With the threat of a potential delisting removed and the price discovery process facilitated by UIC’s general offer, we think SingLand’s share price will find good support at the current levels even if the offer lapsed.
We continue to advocate a Trading BUY on SingLand, which is trading at a 34% discount to our RNAV of SGD14.50. Our T.P of SGD10.80 is premised on a 25% discount to RNAV. |
