Excerpts from analysts' reports

Maybank Kim Eng says Yangzijiang has highest new orders to date in China's shipbuilding industry

Analyst: Yeak Chee Keong, CFA


♦ Reiterate BUY. SOTP -based TP still SGD1.38.

♦ Recent policies to accelerate industry consolidation.

♦ YZJ to gain market share while maintaining its lead.

♦ YZJ has highest new orders YTD and largest order book, in CGT (compensated gross tonnage).


Policies to quicken industry consolidation

Recent policies on China’s shipping and shipbuilding sector suggest a firmer push for shipyard consolidation.

The push started in 2009 but has not been aggressive. The number of Chinese shipyards has dwindled from more than 3,000 in 2010 to about 700, but needs to be cut further.

A capacity flush is essential for sustaining ship-price increases, in our opinion, to aid a sector recovery.

Stands to gain even in muted sector recovery

YZJ was one of 51 Chinese shipyards in a recent government white list to receive policy support. We expect a funnelling of orders to “white-list” yards to hasten the demise of unlisted yards. 

Ren_Liuhua_groupYangzijiang executive chairman Ren Yuanlin (second from left) and CFO Liu Hua (extreme right). File photo.For the first time, the State Council has issued suggestions for developing the shipping industry. These include encouraging ship owners to scrap inefficient vessels for modern ones.

Shipbuilders should benefit from orders by ship owners optimising their fleets.

YZJ can capitalise on this, given its:

1) technological capability. It was the first to deliver 10k TEU containerships in China and has new high-value products such as 14K/16K TEU containerships & LPG tankers;

2) strong financials; and

3) execution record.

These should appeal to ship owners and YZJ could emerge with a bigger market share.

YZJ leads in China’s market with the highest new orders YTD and largest orderbook, in CGT.

With USD1.4b of new orders as of Aug 2014, our forecasts of USD2.1b/2.5b for FY14E/15E should be met.

Upside could come from shipyard consolidation. Core shipbuilding fundamentals are strong, though key risk is the realisable value of its CNY13b HTM assets.

Valuations look attractive at 7.9x FY15E P/E with a 4.3% yield. BUY with SOTP-based TP of SGD1.38.


Full Maybank KE report here. 

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