Yangzijiang celebrated its 10th anniversary of listing in Singapore with a strike-gong ceremony at SGX on 28 April 2017. (Photo: Company)
 Yangzijiang's stock price has risen by about 40% over the past 3 months from 81.5c on 1 February to $1.15 on 28 April 2017. (Chart: Reuters / NextInsight) Boosted by strong order momentum and earnings growth, Yangzijiang Shipbuilding’s share price has been holding steady after surging more than 25% when it announced a record dividend payout.
In one week, its shares rose from 92.5c on 28 February to $1.18 on 7 March after its declaration of a 4c dividend for FY2016, a record payout of 43%. |
“Based on the current market sentiment, we are confident of achieving our 2017 target to secure US$1.5 billion of new shipbuilding orders,” said Executive Chairman Ren Yuanlin at the Group’s 1Q2017 results briefing on 28 April.
(Photo: Company) |
“While we do not see strong demand for containerships, we see opportunities in demand for Very Large Ore Carriers (VLOC), LNG vessels, as well as crude oil and chemical tankers.”
1Q2017 revenue increased 73% year-on-year to RMB 4.7 billion, lifted by revenue recognition for resale vessels.
RMB 551 million was recognized on the resale of four 82,000-DWT bulk carriers which were terminated by its previous owner in FY2016.
The Group had an outstanding order book of US$4.03 billion comprising 84 vessels as at 31 March 2017.
It was ranked no. 1 in China and no. 4 in the world in terms of outstanding order book.
For more information, refer to its 1Q2017 results media release here.
| ♦ 1Q2017 results briefing Q & A | |||||||||||||||
| Q: What is the outlook in demand for tankers? Ren Letian: There were quite a few enquiries to build new tankers in the last 2 years. However, the tanker market now faces an oversupply situation just like for bulk carriers. A relatively large number of new tankers will be delivered this year worldwide. We have 3 small oil tankers in our orderbook. We also have a track record of delivering LNG vessels. If demand picks up, ship owners will have the confidence to place orders for tankers with us.
Ren Yuanlin: Our utilization is now 80%. Q: Bulk carriers generate lower margins relative to containerships. Given the recovery in the bulk carrier market, should we expect a deterioration of the Group’s gross margin? Ren Yuanlin: Shipyards are currently price takers in the newbuilding market for bulk carriers. We are given a choice of whether or not to take the job but we do not have the leeway to set prices. Having said that, Yangzijiang does have two competitive advantages. Firstly, we have a vessel chartering business segment that placed orders with our shipbuilding business segment. This arrangement has given rise to cost savings for us. Secondly, our yard has a cost advantage of about 5% compared to the PRC average. Whether our gross margin is relatively higher or lower ultimately depends on steel prices and the USD-RMB exchange rate. We are hopeful that steel prices will soften and the exchange rate will stabilize. A stable RMB of between US$6 to US$7 will be helpful for our cost visibility and for the economy in general. Q: The market recently saw a higher ratio of the vessel contract value being allocated to the shipbuilding contract downpayment. Is your yard experiencing the same?
Q: Were there any vessel terminations and warranty write-backs in 1Q2017? Liu Hua: Four vessels were terminated: Three 36,500-DWT bulk carriers and one 10,000-TEU containership. Ren Letian: Construction of the containership is near completion. We have not started work on the three 36,500-DWT bulk carriers. Q: Should we be expecting any more vessel cancellations? Ren Letian: We don’t expect more cancellations on the current orderbook because the market is showing signs of recovery. Even some shipowners who previously cancelled vessels have made enquiries about the latest delivery date if they want to continue the contract. |
|||||||||||||||
“Our gross gearing decreased from 31.1% as at 31 December 2016 to 22.8% as at 31 March 2017 as we paid down our borrowings. This gives us a better net cash position and lowers our interest expense.”
