Yangzijiang Shipbuilding is in the preliminary phase of conducting a strategic review of its debt investment portfolio to allow the Group to focus solely on the expansion of its core shipbuilding business.


Excerpts from CGS-CIMB report


Analyst: LIM Siew Khee

Strategic review of debt investment, more disclosure


● YJZ changed its reporting format slightly to reflect segmental EBIT for shipbuilding/debt investment. It also said in the 2Q21 earnings announcement that it is in the preliminarily phase of conducting a strategic review of its debt investment portfolio to allow the Group to focus solely on the expansion of its core shipbuilding business.

ship launch

● Instead of reporting annually previously, YZJ stepped up in disclosing the credit loss allowance for debt investments in 1H21.

NPL (non-performing loan) for debt investments stood at 15.6%, improved from 17.2% as at 31 Dec 21.

Total credit loss allowance balance remained steady hoh at 10% as of 30 Jun 21. YZJ reversed a total of Rmb166m of allowance (- 0.6%) in 1H21 vs. average allowance of 0.8% in FY21.

● We think that if the division is spun off or being reduced in the overall investment size to Rmb10bn or less, it would be a major catalyst as it alleviates investors’ concerns over shading banking.

However, one has to also stomach the potential loss of recurring income of interest from debt investment (c.50% of its gross profit).

2Q21 debt investments balance grew to Rmb16.6bn (1Q21: Rmb14.8bn), with interest income down 14% qoq to Rmb417m.

Yangzijiang 

Share price: 
$1.67

Target: 
$1.91

■ Order book solid at US$8.65bn. Maintain Add and unchanged TP of S$1.91.

Outcome of strategic review of debt investment portfolio is a major catalyst.



Full report here. 


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