WITH THE global recovery in international trade, shipyards are getting busy again.
Leading Chinese shipbuilder Yangzijiang announced on 12 Jan that it secured 15 shipbuilding contracts during 4Q10, with an aggregate contract value of US$415.30 million.
These comprise three 47,500 DWT bulk carriers, four 49,500 DWT bulk carriers, two 7,600 DWT bulk carriers and six 82,500 DWT bulk carriers that will be delivered over 2011-2013.
Two brokers recently reiterated their price targets on the shipyard, with a median price target of S$2.55, translating to upside of 24% based on its closing price of S$2.05.
Credit Suisse maintains ‘Outperform’ call with target price S$2.40
Analysts: Gerald Wong, Bhuvnesh Singh, Christopher Chang
We maintain our OUTPERFORM rating and target price of S$2.40.
In our report, Growth potential unlocked with capacity increases, published on 10 January 2011, we highlighted that increased yard capacity would allow Yangzijiang to take in orders worth US$2 billion to US$3 billion in 2011.
Recent press reports suggest that the recovery in orders in 2010 has been maintained into 2011, with potentially another US$200 million order for six 82,000 DWT bulk carriers.
Even though bulk carriers continue to make up most of the orders, we expect containership orders to strengthen in 2011, given Yangzijiang’s exposure to a recovery in this segment.
We believe Yangzijiang is the best positioned amongst the Chinese yards to benefit from a recovery in containership orders as the largest containership producer in China with more than 10% market share.
Yangzijiang offers attractive value at a 2011E P/E of 11.7x, with a 16% net income CAGR over 2009-2012E.
Consequently, we lift our earnings estimate by 5% for FY12 and our target price to S$2.69, still based on 14x CY12 P/E, in line with regional peers.
CIMB maintains ‘Outperform’ call with target price S$2.69
Analyst: Lim Siew Khee
Maintain ‘Outperform’ with higher target price of S$2.69 (from S$2.57).
The new orders bring 2010 contracts won to about US$1.5bn. We raise our order intake for 2011 from US$1bn to US$1.5bn on the back of the strong order momentum in 4Q10.
Yangzijiang remains our top pick in the sector with a high conviction.
The ‘Outperform’ rating is due to its earnings-growth resilience and proven tight execution.
Catalysts could include stronger-than-expected order wins and higher revenue from productivity gains, in our assessment.
The latest bulk carrier orders are mainly from Chinese ship owners, including Huayang International and Redwood Ocean Shipping Group.
We expect the trend to continue into 2011 as Chinese ship owners take the view that there would be a recovery in the bulk segment from 2012 onwards.
The last crisis may have booted out smaller shipyards from the industry, leaving state-owned and quality private yards such as Yangzijiang in the playing field.
Given its leading position, we believe Yangzijiang would benefit from any further uptick in the containership sector.
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