Why am I buying Yanzijiang and JES International now

05 Sep 2013 16:20 #15976 by greenrookie

Deutsche Bank report today: "We have raised our FY13-15E net
income for YZJ on higher new orders; we raise our target price from SGD1.00 to SGD1.15 (upgrade to Buy) and we believe the potential exercise of 47 options worth USD2.54bn may drive the stock price in the coming quarters."

greenrookie, do u know about the US$2.54 bn options? How do they work ?

Yeh, I am no expert in this, but my guess is option works for customers more than for shipbuilders.

e.g. you rent out the house for 1+1 year, the second year is the option to renew, my tenant do not have to renew, but if he wants to renew and a pre-agreed price,I have to give him the first right of refusal. I cannot look for other tenants

SO, when a customer have a option to build, the customer can don't exercise the option, but when he does, YZJ has to build. So look at confirmed order book, options are redundant IMHO

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05 Sep 2013 21:34 #15982 by Azzaramich
i also wish to add that the gross profit margin and the payment mode are also important. Most Chinese shipbuilders are undercutting to win business. Also, the payment term is backloaded, which means there would be liquidity issue or higher cost of capital in the short term.

I am still holding on my YZJ shares, although I have liquidated some at a loss. What worries me most is not their business, but their reliance on MTN to drive their earnings in recent years.

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17 Sep 2013 13:53 #16225 by yeng
Azzaramich: Don't worry too much. Things are improving... Analysts are recognising that Yangzijiang will emerge a strong winner. Just read the Deutsche report dated 16 Sept.

Key takeaways from investor luncheon

We recently hosted YZJ at an investor luncheon. The main takeaway is that the group remains in a strong position as the Chinese shipbuilding industry consolidates and that it continues to see active customer enquiries. YZJ is
currently discussing with potential customers for vessel deliveries in 2017 and appears to be a little more selective. While the group is asking and hoping for
higher prices for future orders, it has not seen a fall in enquiries. They believe this sustained interest is due to customer preference for stronger yards that can deliver and survive the consolidation. As many Chinese yards are weak, potential customers appear to have fewer choices if they are interested in placing an order and eventually receiving the final product.

YZJ has observed the withholding of payments from customers to weaker yards in China and due to weak cash flows at those yards, it thinks the industry may be compelled to consolidate. Across the sector in China, YZJ has seen weak performances from
the State-owned shipyards and very few private ones are profitable. For more details on the industry, please refer to our report “Winners/losers from a consolidating industry, upgrading YZJ to Buy”, dated 5 Sep 13.

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28 Sep 2013 11:23 #16354 by yeng
BARCLAYS in Business Times today! Target price $1.50 !

Barclays upbeat about Yangzijiang, cites progress on contracts

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YANGZIJIANG Shipbuilding is on track to deliver its large contracts, fuelling analysts' optimism about the Chinese vessel builder.

Barclays Research has turned more upbeat on Yangzijiang after a recent visit to the company's Jiangsu shipyards and the Shanghai off-shore design facility. It cited the shipbuilder's launching of its first large container vessel and progress towards delivering its first jack-up rig in 2015.

"We expect successful execution on these high-value products to drive multiple expansion in the near term," Jon Windham, head of the infrastructure & transport sector research team at Barclays, said in a report published yesterday.

Barclays found that construction on five 10,000 TEU (20-foot equivalent units) container vessels Yangzijiang is supposed to deliver in 2014 is on schedule with the first delivery expected in the first quarter of next year, marking a significant jump up the value-chain for the group and an important product differentiator in the current industry slowdown.

Moreover, it found that progress remains on schedule for the company's first jack-up rig which is expected to begin major assembly in the second quarter of 2014 at the new Taicang yard for delivery in the third quarter of 2015.
Barclays maintains its "overweight" rating on Yangzijiang with an unchanged target price of $1.50.

"We continue to view Yangzijiang as the best positioned private Chinese shipyard. We expect Yangzijiang's continued ability to successfully execute in the large container and off-shore market to drive higher valuation multiples in the near-term at higher earnings in the longer- term," Mr Windham wrote.

Barclays believes the upside case for Yangzijiang, at a price of $2.60, could occur if a synchronised and sustained global recovery boosts trade volumes, leading to higher container vessel purchases. This could increase the group's earnings and boost its order book by 20 per cent.

On the other hand, a downside case, at a price of $0.46, could occur if there is aggressive pricing competition from South Korean and Chinese dry bulk yards attempting to move into container vessels, along with material default of Yangzijiang's "held-to-majority" assets.

Yangzijiang shares closed trading yesterday at $1.165.

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01 Oct 2013 00:59 #16385 by yeng
It doesn't make sense. Non-executive director Yu Kebing sold 55 m shares today at $1.12.

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01 Oct 2013 13:00 #16386 by greenrookie
I never like insider sell-down, especially a large stake.

But for his case, I think its more like a re-aligment of his investment since 2008

Before this:
2008 OCT (Price then: 32-40cents)
From 16.25% to 3.32% Due to the Disposal of 24.04% interest in the share capital of Lido Point Investments Ltd. ("Lido Point"), which holds 510,466,000 shares representing approximately 16.25% of the total number of issued shares (excluding treasury shares) in the Company (the "Shares").

11 Aug 2009 (2.3424% - 2.26%)
Open market sales (Price then $0.965- $0.985)

2 Dec 2009 (2.26% -2.04%)
Open market sales (Price then $1.23)

03/09/2010(1.99%-1.58% thereafter 1.46% due to dilution of dual-listing)
Sale of 20,000,000 shares pursuant to the Companys Taiwan Depository Receipt Issue (price $1.55)

Open market purchase (300 lots at 1.115)

The intention to leave might already start in 2008, when he sell Lido investment, the holding company of the key founders of the company.

Market might sell it down further due to US volality. If it does go back to my initial purchase price, I will buy more if the 3 key personnel, renyuanlin, wang dong, and xiang Jiajun do not sell.

1)10000Teus luanched, 1 operation risk less.

2)Applying for a private banking license

If they succeed, clampdown on shadow banking activties in the future will have no impact whatsoever on them. They can also access more funds too for expansion, but I would like the" banking arm" to be no bigger than 20%

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