Yangzijiang Shipbuilding (Holdings)

Further update on the orders book.

(vested)

New orders worth US$626m for Yangzijiang in Q4
23 Dec 2015 09:00
By Tan Hwee Hwee

YANGZIJIANG Shipbuilding has confirmed winning a shipbuilding order for two self-unloading vessels as it announced in an update that it has entered into contracts for another 11 vessels in the fourth quarter for a total value of US$626 million.

Other vessels in the deals are six containerships and three combination carriers.

As previously reported by BT, the two self-unloading vessels, of 29,800-deadweight tonne (dwt), were on order from Algoma Central Corporation for loading and unloading cargoes in the five lakes of Canada. YZJ had said each of these vessels was priced 30 per cent or more above comparable commoditised dry bulkers.
...
Source: Business Times

Finally the price dropped below $1 and I started looking.

This, I don't understand. Are they allowing the roll-over of the matured debt? 

The financial assets, held to maturity under Current Assets has been hovering around RMB 5.4 - 8.6 bn for the past 8 quarters. i.e. that amount was expected to be retired within 12 months. 

Financial assets, held to maturity (Current Assets)
3Q15 5,472,531
2Q15 5,399,915
1Q15 6,266,663
4Q14 5,278,932
3Q14 7,751,480
2Q14 8,621,260
1Q14 6,043,269
4Q13 7,832,661
3Q13 6,383,031

However, the reduction of these financial assets in total was much slower. Only 2.9bn was retired in the last 12 months.

3Q15 9,736,413
3Q14 12,632,470
3Q13 12,473,931

2014AR Wrote:We decided to rationalize the Group structure by scaling down businesses such as investments in held-to-maturity financial assets and real estate development.

it is possible that these HTM financially assets may face partial default if they are related to the O&G sectors. In fact I have never favour companies that stray out of their core competencies.

It is one thing to make the loan & earn interest but totally different thing if you cant collect back your capital. Prospective investors should give this a serious thought. Speaking to the CEO or CFO face to face during annual meetings should not be taken as an assurance that they HTM investments are safe. What they tell you may not be 100% true

The HTM is mostly short-term (less than 1 year) on average. The last update was 60% of them, matured within 1 year. Thus the a high current portion of the asset. I assume the ratio remains more and less the same now. Based on the last PPT, there is an obvious shift of borrowers, to gov-related parties, from usual about 20% to close to 50% in amount.

The interest are mostly collected, based on the impairment reserve. The recycled capital is "re-invested", may be the same borrowers, may be not.

(vested)

(14-01-2016, 09:25 AM)cif5000 Wrote: Finally the price dropped below $1 and I started looking.

This, I don't understand. Are they allowing the roll-over of the matured debt? 

The financial assets, held to maturity under Current Assets has been hovering around RMB 5.4 - 8.6 bn for the past 8 quarters. i.e. that amount was expected to be retired within 12 months. 

Financial assets, held to maturity (Current Assets)
3Q15 5,472,531
2Q15 5,399,915
1Q15 6,266,663
4Q14 5,278,932
3Q14 7,751,480
2Q14 8,621,260
1Q14 6,043,269
4Q13 7,832,661
3Q13 6,383,031

However, the reduction of these financial assets in total was much slower. Only 2.9bn was retired in the last 12 months.

3Q15 9,736,413
3Q14 12,632,470
3Q13 12,473,931

2014AR Wrote:We decided to rationalize the Group structure by scaling down businesses such as investments in held-to-maturity financial assets and real estate development.

Yes. I can see that the amount of HTM is lower....scaling down.


FY2013 RMB14.7B
FY2014 RMB11.7B
3Q2015 RMB9.7B

if this commodity and shipping slump continues, YZJ price below $0.50 is a good possibility, especially as HTM gets less and interest rates fall in China, income will get less and leave a gap in profits as well as dividend cuts. Some more this counter is very speculative. It was trading only 20-30cents during GFC time.

(14-01-2016, 10:46 AM)donmihaihai Wrote: Yes. I can see that the amount of HTM is lower....scaling down.


FY2013 RMB14.7B
FY2014 RMB11.7B
3Q2015 RMB9.7B

The scale down will have to be a lot slower (if done without impairment) than the scale up.

Total HTM
FY14 10,791,200
FY13 14,127,351
FY12 11,376,710
FY11 10,473,160
FY10 8,614,741
FY09 4,788,367
FY08 1,782,049
FY07 30,000


Interest income from HTM
FY14 1,505,049
FY13 1,413,992
FY12 1,096,331
FY11 916,878
FY10 616,123
FY09 185,723
FY08 60,773
FY07 0


Interest income/Total HTM
FY14 13.9%
FY13 10.0%
FY12 9.6%
FY11 8.8%
FY10 7.2%
FY09 3.9%
FY08 3.4%
FY07 0.0%

The annual reports actually disclose the interest rate of these instruments. However, the disclosures changed over the years. Investors can (should) read up these changes. 

e.g. 
In AR 2012, we see that the category of "More than 3x the PBOC benchmark rate of 6.00%" ballooned. That's a pretty high interest rate (>18%??), isn't it? From AR 2013 and 2014, such presentation was taken out and the fair value was then based on DCF.

HTM was accounted under investing activities of the cashflow statement. Not anymore from FY11 after it became a single line entry under working capital changes.

An interest rate of >18%, was insane, in the context of Singapore or developed countries, but it was the norm then. I recalled, the norm "private-secured-loan" market interest rate, was 20-25% pa then. I reckon, the interest rate is lower now, due to more lower-cost access to debt market.

The HTM is been re-classified as operational biz, rather than investment activities then.

(vested)

isn't it funny that 18% interest is considered the norm? how many businesses can earn earnings of 18% & more on borrowed capital? (if you are going to borrow at 18%, then you are expecting to earn at least 20%, otherwise it just doesnt make sense to borrow money.) On top of that, if that business can earn so much on capital, then most of the time, such businesses are so flooded with cash that they don't need to borrow money.

I read somewhere that these HTMs are loaned to government related entities. I would be very very surprised that these government related entities can make money in excess of 18% on capital. DONT be blinded by the high interest rate and ignore all other factors!

I hope there is no time bomb here. The risk can be very high to get so high interests.