Excerpts from UOBKH report
Analyst: Adrian Loh
Yangzijiang Shipbuilding (Holdings) – BUY
• COVID-19 impact. Post 2019 results, we hosted a client call with the company’s management where it said that thus far, the impact of travel restrictions in China the company is minimal, given that January and February are usually quieter months due to the Lunar New Year celebrations.
At present, 20-30% of its workers are back at work and a key turning point will be in March where YZJ needs to see at least 80% of its workers back at the yard, and thus hit its target to deliver 51 ships in 2020. In addition, the company said its clients are understanding and can accept delays of 1-2 months. |
||||
• YZJ is targeting US$2b of new orders for 2020 (vs our expectation of US$1.5b) and is confident of this target, given that Jan-Feb 20 has seen a significantly higher rate of enquiries than in 1Q18 which had almost zero enquiries.
The company commented that it had a few contracts on hand that it is close to announcing, and it has also received new enquiries from old clients who are looking to place orders.
Importantly, YZJ believes that its orderbook as at 29 Feb 20 totalling US$3.02b will not experience cancellations as their clients are not speculators but instead have business strategies to open new lines/shipping routes or renew their vessels.
 Adrian Loh, analyst• Strong balance sheet and undemanding valuation. As at end-19, the company had net cash of some Rmb5b. We highlight that its one-year forward P/B of 0.54x is 13% below its -1SD level and near its all-time low of 0.51x, while its 2020 yield is attractive at 5.7%, in our view. Maintain BUY and P/B-based target price of S$1.40. |
Share Price Catalyst
• New ship-building order announcements.
• At least 80% of its workers returning to its shipyards by end-Mar 20.
• Timeline: 2-3 months.
Full report here.
