Nomura is at the other extreme as the report here shows. It's only because Nomura 'fully discounts" YZJ's held to maturity investments. Rather strange in my view. So Nomura's TP is only 74 cents. Aiyah, this sort of price level will not be re-visited again.
For what it is worth:
Action: Downgrade to Reduce, TP at SGD0.74 We like Yangzijiang (YZJ) for its proactive approach in securing new contracts. However, we remain negative on the overall commercial
shipping industry outlook and YZJ’s shrinking margins and orderbook. We think the share price has out-run itself and should correct to more accurately reflect the non-positive shipbuilding outlook. As such, we downgrade to Reduce with a price target of S$0.74
Catalyst: Newbuild pricing weak, demand to be lacklustre Recent new orders won by YZJ were done at an average price of US$28m. We estimate that a similar order would have fetched an average of US$35m previously. This is reflective of a poorer pricing environment.
Our shipping analysts expect the container segment to suffer further losses in 2012 and BDI levels to remain at loss-making levels. As such, we think that newbuild demand from vessel owners will be low. We believe that YZJ will continue to win orders but at the expense of margins. Due to falling new orders and shrinking margins, revenues and profits from the core shipbuilding segment are expected to shrink. However, earnings will continue to be held up by non-core investment income and other gains which are coming in higher than expected.
Valuations
We continue to value YZJ solely as a shipbuilding business on a SOTP basis, while fully discounting its HTM investments, which were worth S$0.55/sh as at end-2011. YZJ trades at FY12F/13F P/Es of 7.2 / 10.0x which are at the mid band of its historical range (P/E range of 3.7 / 13.3x).
Extracted and translated from the ZB article (recently interviewed Mr Ren) below:
âIn FY2011, Yangzijiang declared 5.5 Singapore cents of dividends, which would translate into some S$55 million in dividends for Mr. Ren YuanLin based on his shareholding in Yangzijiang. What was pleasantly surprising is the fact that he has pledged this amount, together with all future dividends to be received from his 26% stake in Yangzijiang, into the Yuanlin Charity Foundation.â
NextInsight
a hub for serious investors
