| UOBKayhian recommends 'buy' for Yangzijiang |
| Singapore-based brokerage house UOBKayhian has recommended a 'buy' status for Yangzijiang Shipbuilding Holdings because of its resiliency amid the difficult shipping environment. UOBKayhian highlighted that the Singapore-listed shipbuilding company has secured over USD4.6 billion for 114 vessels in its orderbook, reflecting the superior management of Yangzijiang in getting orders despite an excess tonnage shipping market. The orderbook includes USD135 million contracts for two LNG vessels secured in February 2015, as well as Yangzijiang’s agreement with container ship management company Seaspan Corporation for the options of six additional 10,000 teu container ships. In addition, there were two options with a total contract value of USD238 million relating to two 36,500 dwt bulk carriers and two 10,000 teu container ships. Therefore, Yangzijiang’s management is guiding total contract wins of approximately SGD2 billion (USD1.5 billion) for 2015. Meanwhile, the brokerage house stated that 85% of Yangzijiang’s revenue for first quarter of 2015 was contributed by the core shipbuilding business, while 13% came from trading and remaining 2% from other businesses. Shipbuilding-related segment’s gross margin was 18%, up around 2% year on year (y/y). However, its core shipbuilding gross margin fell 3% y/y to 21% in the first quarter of 2015. Despite lower margins, UOBKayhian felt the figure is still healthy in view of the bearish shipping market. “Yangzijiang has proven its leadership among non-state-owned enterprise (SOE) shipyards throughout the years with its strong order win and project execution capabilities and a robust balance sheet. The stock is expected to pay a decent annual dividend yield of 3.6-3.8%,” said the analysts from UOBKayhian. The brokerage house has set a target price of SGD1.67 per share for the company’s stock. Its stock is currently trading at around SGD1.47 per share. |