by winston » Fri Oct 04, 2019 9:59 am
vested
Yangzijiang Shipbuilding (Holdings) – BUY
We believe YZJ's share price weakness in August regarding its chairman assisting investigations in China is unwarranted, as it does not involve YZJ or its funds.
Importantly, the medium-term shipbuilding outlook appears positive and the company is trading at an inexpensive valuation of 0.56x P/B (-2SD below 5-year average).
We have a BUY recommendation on the stock and a P/B-based price target of S$1.46.
Management has the experience and expertise to run the company while the chairman is away. In particular, Mr Ren Letian, the CEO of YZJ for the past five years and the son of Chairman Ren Yuanlin, has been with the company since 2006 in various roles. With his detailed knowledge of shipyard and shipbuilding operations, the core business will not be affected in the absence of the company’s chairman, in our view.
Positive shipbuilding outlook in the medium term. In late-Aug 19, YZJ announced a new order win for three 82,000DWT bulk carriers and two 325,000DWT bulk carriers which we estimate at approximately US$250m.
Ytd order wins now total US$604m and is comfortably approaching our 2019 order-win estimate of US$1b. We forecast that order wins will improve to US$1.5b in 2020 driven by:
a) market-share gains at the expense of Korean yards, helped to some extent by the cheaper renminbi, and
b) shipowners complying with stricter International Maritime Organisation (IMO) environmental
regulations that come into force in 2020.
YZJ noted that newbuild enquiries in 2H19 have been stronger compared to 1H.
Share Price Catalyst Event:
a) New ship-building order announcements, specifically from Japanese shipowners due to the positive synergistic effects of the Mitsui JV; and
b) news that the chairman is no longer assisting in the Chinese authorities’ investigations.
Timeline: 2-3 months.
Source: UOBKH
It's all about "how much you made when you were right" & "how little you lost when you were wrong"