UOBKayhian on 6 June 2014
FY14F PE (x): 6.4
FY15F PE (x): 6.2
Yangzijiang Shipbuilding (YZJ) made an announcement via SGX, regarding the 10.6%
share price decline on 30 May. As per the announcement, a possible reason could be
allegations of misdeeds made by Tianjin Guoheng Railway Holding (000584 CH), a
company listed on the Shenzhen Stock Exchange (SZE), on 26 May 14 against Mr
Ren Yuanlin, the Executive Chairman and controlling shareholder of YZJ and Taixing
Liyuan Investment, his investment vehicle.
Core shipbuilding business remains intact. Despite YZJ only securing three 82,000
dwt dry bulk carriers in April and May, YZJ’s 2014 newbuild orders target of US$2.0b
(2013A: US$2.9b) is still doable, given 1Q14 orders already fulfilled 50% of full-year
target. As the capacity has been fully booked into 2016, YZJ has turned conservative
and only targets orders with higher margins and more favourable payment terms.
Maintain BUY with target price of S$1.39 unchanged, based on 1.3x 2014F P/B. YZJ
has proven its leadership among non-SOE shipyards throughout the past years with
its strong order winning/project execution capability and robust balance sheet.
Concern over risk of HTM financial assets is overestimated and share price weakness
offers buying opportunity
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