Excerpts from latest analyst reports…
OCBC Investment Research upgrades Yangzijiang to ‘buy’
Analyst: Low Pei Han
New ship orders in China rose from 12.8m gross tons YTD in Apr ‘10 to 19.6m gross tons YTD in May ‘10. This compares to just 1.2m gross tons YTD in May ’09.
Yangzijiang Shipbuilding (YZJ) has invested RMB313m in VC funds to generate capital gains, amongst other aims.
Though this represents just 4% of the group’s cash and about 4.5% of its NTA, it is comparable to the amount of dividends paid in a year.
As these are fairly long term investments, we do not expect any significant financial impact for the near to medium term.
Middle Eastern investor, QD Asia Pacific, will also subscribe for 83.6m new shares in YZJ, owning 2.24% of the enlarged capital.
Eurozone uncertainties still remain but assuming a fall-out in the region does not happen, we think the possibility of substantial order cancellations remains low for now.
With an upside potential of about 19%, we upgrade YZJ to BUY, keeping our S$1.60 fair value estimate intact.
Avi-Tech Electronics: Positive news may herald good sales recovery
OCBC Investment Research analyst: Kevin Tan
For example, big chip makers such as Texas Instruments and Infineon had recently raised their forecasts amid broad-based strength in their operating segments and had guided for capacity additions to ease their loaded facilities. As they are major customers of Avi-Tech, we expect the group to gain from the increased demand as well.
While we note that there are warnings of growth rates moderating in the coming months, or even a slowdown in global semiconductor sales as communicated in our June sector report, we believe it is likely a reflection of an improving 2H09 (as compared to its trough in 1Q09) and also a reversion to historical seasonal patterns rather than a deterioration in the industry’s fundamental health.
We continue to like Avi-Tech for its proven track record (almost 30 years of corporate history), strong financial position and sturdy cashflows.
With the current share price presenting an attractive total expected return of 32.4% to our S$0.24 fair value (including FY11F dividend yield of 6.1%), we maintain our BUY rating on Avi-Tech.
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