Excerpts from analyst's report
RHB analyst: Lee Yue Jer, CFA
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Yangzijiang announced that it has secured a net 10 new orders worth USD626m, which include four 11,800TEU containerships, the largest to be built by a private Chinese yard. |
Another step up the value chain
Yangzijiang Shipbuilding (YZJ)’s new orders comprise four 11,800 twenty-foot equivalent (TEU) containerships, two 1,668TEU containerships, two 29,800 deadweight-ton (dwt) self-unloading vessels and three 83,500dwt combination carriers. The 11,800 TEU containerships are the largest ever to be built by a private yard in China, taking YZJ another step up the technological value chain. These orders will be delivered in 2018.
Customer adds a net two vessels in tactical shift
One customer terminated a 82,000dwt bulk carrier (likely due to persistent weakness in the dry bulk sector) in 4Q15, replacing the order with the three 83,500dwt combination carriers. The customer agreed to let YZJ keep the 10% deposit for the bulk carrier as compensation.
Exceeds USD2bn order win target
These contracts propel the company’s FY15 orders YTD to 37 vessels worth USD2.25bn, with just one cancellation. It also pushes YZJ’s orders won above its own USD2bn target for this year. In addition, there are 13 outstanding options comprising two 1,668TEU containerships, two 1,900TEU containerships, three 29,800dwt self-unloading vessels and six 83,500dwt combination carriers. The options may be worth c.USD400m.
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Margin decline already priced in
At 0.84 FY15F P/BV, c.6x FY16-17F P/Es and <3x EV/EBITDAs, we believe that margin concerns are already priced in.
The high orderbook could drive revenue growth, which should offset the margin decline to allow the company to deliver a stable c.CNY3bn bottomline annually.
Maintain BUY, with an unchanged SGD1.61 SOP-based TP.