Yangzijiang Shipbuilding (YZJ) reported a 14% YoY fall in revenue to RMB3.0b and a 12% drop in net profit to RMB706.9m in 1Q15, such that the latter formed about 24% of our full year estimate, in line with expectations. Held-to-maturity assets totaled RMB11.7b in the quarter vs RMB12.8b a year earlier, and management looks to lower this to less than RMB10b by end 2015. The group has clinched new orders of US$373m to date, but we expect more to come, as six new options with Seaspan are likely to be exercised by the end of the year. With an order book with a total contract value of US$4.6b, YZJ expects its yards to be utilized till at least end 2016. Rolling forward our valuations and updating our SOTP table, our fair value estimate rises from S$1.42 to S$1.54. Maintain BUY.
1Q15 results in line
Yangzijiang Shipbuilding (YZJ) reported a 14% YoY fall in revenue to RMB3.0b and a 12% drop in net profit to RMB706.9m in 1Q15, such that the latter formed about 24% of our full year estimate, in line with expectations. The group’s shipbuilding business registered a healthy gross profit margin of 21% in 1Q15, compared to 24% in 1Q14, mainly due to the delivery of 10,000TEU containerships with higher contract prices.
Moving from direct lending to partnerships with govt-related funds
Held-to-maturity assets totaled RMB11.7b in the quarter vs RMB12.8b a year earlier, and YZJ shifted a greater proportion of its investments into lower-yield government-related projects, lightening its exposure to the private sector. Management looks to lower the total to less than RMB10b by end 2015, and may pursue partnerships with government-related fund managers to manage its excess cash.
US$373m new orders to date; more to come
Further to the two LNG carriers order worth US$135m announced on 16 Feb, YZJ has entered into an agreement with Seaspan for the options of six additional units of 10,000TEU containerships (~US$93m apiece). In addition, options comprising two 36,500DWT bulk carriers and two 10,000TEU containerships worth US$238m were exercised in Apr 2015. YZJ is keeping its US$2b new order target for FY15.
Market leader in China
This brings the outstanding shipbuilding orderbook to 114 vessels worth a total of US$4.6b as of 30 Apr 2015. With the new effective orders, the group’s yards will be utilized till at least end 2016. According to Clarksons Research, as of end Feb 2015, with 2.9m CGT orders at hand, Yangzijiang Shipbuilding ranked the first in China and eighth in the world in terms of outstanding orders.
Higher FV of S$1.54
We roll forward our valuations to blended FY15/16F earnings for the shipbuilding related segment, and increase our peg for the held-to-maturity segment from 0.85x P/B to 0.95x P/B with higher valuations of Chinese banks. We also include the group’s development properties in our SOTP valuation. This increases our fair value estimate from S$1.42 to S$1.54. Maintain BUY.
Yangzijiang Shipbuilding (YZJ) reported a 14% YoY fall in revenue to RMB3.0b and a 12% drop in net profit to RMB706.9m in 1Q15, such that the latter formed about 24% of our full year estimate, in line with expectations. The group’s shipbuilding business registered a healthy gross profit margin of 21% in 1Q15, compared to 24% in 1Q14, mainly due to the delivery of 10,000TEU containerships with higher contract prices.
Moving from direct lending to partnerships with govt-related funds
Held-to-maturity assets totaled RMB11.7b in the quarter vs RMB12.8b a year earlier, and YZJ shifted a greater proportion of its investments into lower-yield government-related projects, lightening its exposure to the private sector. Management looks to lower the total to less than RMB10b by end 2015, and may pursue partnerships with government-related fund managers to manage its excess cash.
US$373m new orders to date; more to come
Further to the two LNG carriers order worth US$135m announced on 16 Feb, YZJ has entered into an agreement with Seaspan for the options of six additional units of 10,000TEU containerships (~US$93m apiece). In addition, options comprising two 36,500DWT bulk carriers and two 10,000TEU containerships worth US$238m were exercised in Apr 2015. YZJ is keeping its US$2b new order target for FY15.
Market leader in China
This brings the outstanding shipbuilding orderbook to 114 vessels worth a total of US$4.6b as of 30 Apr 2015. With the new effective orders, the group’s yards will be utilized till at least end 2016. According to Clarksons Research, as of end Feb 2015, with 2.9m CGT orders at hand, Yangzijiang Shipbuilding ranked the first in China and eighth in the world in terms of outstanding orders.
Higher FV of S$1.54
We roll forward our valuations to blended FY15/16F earnings for the shipbuilding related segment, and increase our peg for the held-to-maturity segment from 0.85x P/B to 0.95x P/B with higher valuations of Chinese banks. We also include the group’s development properties in our SOTP valuation. This increases our fair value estimate from S$1.42 to S$1.54. Maintain BUY.
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