41 shipbuilding contracts worth USD1.8bn. Yangzijiang entered into nine new shipbuilding orders in 4Q14, bringing order wins for the year to USD1.8bn, consisting of 41 vessels. These comprised two 10,000 twenty-foot equivalent unit (TEU) containerships, four 36,500 deadweight-tonne (dwt) bulk carriers, two 2,700TEU containerships and one 64,000dwt bulk carrier. These vessels are expected to be delivered in 2015-2017. Additionally, the company granted four options for two 36,500dwt bulk carriers and two
1.8-year orderbook on hand. 2014’s USD1.8bn close was within the company’s USD1.5bn-2.0bn target range, though falling short of our USD2.2bn forecast.
We calculate the current orderbook, net of 4Q14 recognitions, to be c.USD4.5bn, which would cover 1.81 years of FY15F shipbuilding revenue.
With a total USD4.7bn of orders in the last two years, Yangzijiang’s yards are relatively full and we moderate our order win expectations to USD2.0bn going forward.
Positive macro trends. With sales revenues in USD and costs in CNY, the strengthening USD should benefit Yangzijiang. The lower oil prices are a strong positive for global economic growth, which should increase trade flows and demand for shipping services. As a global leader in shipbuilding, Yangzijiang stands to benefit from this macro trend.
Maintain BUY with SGD1.68 TP. We continue to like Yangzijiang as the most efficient shipyard in China, which combines the lowest cost structure with strict discipline on order intakes.
Maintain BUY with a SOP-based TP of SGD1.68, which values the shipbuilding business at 8x FY14F trough earnings. Current valuations are inexpensive at c.6x FY15/FY16F P/Es, c.3x EV/EBITDA, with a 4.3% dividend yield. We also highlight that the company is trading near book value, on c.16% ROE.
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