• UOB Kay Hian's alpha picks portfolio, which is updated every month, bears watching. It has done well. •In February 2025, a pick tumbled 26%: Yangzijiang Shipbuilding, which was hit by a US proposal to impose port fees on Chinese-built ships. Like several other analysts, UOB Kay Hian's Adrian Loh has stayed confident in the company (more below).  • There is a whopping 45% upside to UOB's current price target for Yangzijiang (see chart above), whose FY24 earnings was 62% higher y-o-y at RMB6.6 billion. Yangzijiang proposed a final dividend of 12 Singapore cents per share, up 84.6% yoy. This translates to a dividend payout ratio of 38.6%. Read more below .... |
Excerpts from UOB KH report
ACTION
• Revising our portfolio. We add Riverstone and UMS Integration due to better-than-expected earnings growth in 2025 while also adding SIA Engineering and CapitaLand Integrated Commercial Trust on the back of an ongoing earnings and tourism recovery respectively.
We remove Venture, Civmec and Lendlease REIT from our portfolio as we see a lack of near-term share price catalysts.
| Yangzijiang Shipbuilding - Buy |
Analyst: Adrian Loh
• Strong results that beat our and consensus expectations. Yangzijiang Shipbuilding (YZJ) reported 2024 revenue of Rmb26.5b (+10.1% yoy) and PATMI of Rmb6.6b (+62% yoy) driven by strong performance in both its shipbuilding and shipping segments.
The highlight of the results was its 2H24 shipbuilding margin which rose 3.8ppt sequentially to 29.7% (2024: 27.9%). |
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Adrian Loh, analyst • Unconcerned about the USTR’s proposal. The United States Trade Representative (USTR) proposed the imposition of port fees of up to US$1.5m for Chinese-built vessels that enter US ports, negatively impacting YZJ’s share price in the past few days.
During the results call, management highlighted that its shipowner clients have taken a wait-and-see approach and that it has not received any order cancellations or deferrals.
Importantly, its clients calculate that the port fees amount to US$100 per container and thus could be easily passed on.
• Selling overdone – we elect to keep the stock in our Alpha Picks portfolio. In our view, YZJ’s share price decline (-27% since its peak on 20 Feb 25) is overdone and we point to the company’s inexpensive 2025F PE valuation of 6.6x and our forecast ROE for the company of nearly 25%.
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• We have a BUY recommendation on the stock with a PE-based target price of S$3.50. • Events:
• Timeline: 3-6 months. |
Full report here.
