Credit Suisse highlights improving fundamentals for Yangzijiang Shipbuilding's core business
Analyst: Gerald Wong, CFA
Yangzijiang management noted active enquiries for new vessels, and expects order momentum to remain strong in 2H14. NextInsight file photo
We hosted a lunch with Yangzijiang where management outlined its strategy for growth. The company aims to move up the value chain and is targeting orders for larger and more complex vessels, including 14,000-16,000 TEU containerships and LPG carriers.
Management noted active enquiries for new vessels, and expects order momentum to remain strong in 2H14 as its strong financial position leads to a disproportionate share of new orders. Firm newbuild prices are also likely to support shipbuilding margins.
With improving fundamentals for its core shipbuilding business, total investment in non-shipbuilding businesses will be brought down from a peak of Rmb16 bn and capped at Rmb13 bn. We expect a gradual decline in its total held-to-maturity (HTM) assets to Rmb12 bn by end-2014. Potential M&A opportunities could lead to a further reduction in HTM assets.
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