Yangzijiang Shipbuilding (Holdings)

(03-10-2013, 01:39 PM)CityFarmer Wrote:

desmondxyz Wrote:KE missed the boat so they try to sink it??

The best way to make use of analyst report, is to focus on facts, rather on the conclusion.

IMO, the report is more on timing of market, with a short time view. I view it as there are still chance to buy if you miss the boat previously.

Sent from my GT-I9505 using Forum Runner

I am actually quite amused by both KE report and the flurry of reports upgrading their price targets, with just 1-2 months difference.

The below is reproduced from my blog: (Warning: long post):

----------------

I think its all about getting you to trade to earn commission.

I am not carried away by seemingly upgrades of target prices, I feel that analysts are slapping their own faces.

I saw on a forum an analyst report cut and pasted, it has a sell call, it goes like this:

———————-

Yangzijiang Shipbuilding: Wary of a False Dawn; Cut to Sell, $1.135 – TP
$0.98
YZJSGD SP | Mkt Cap USD3.5b | ADTV USD13.2m

Ø Cut to contrarian SELL, SOTP-based TP at SGD0.98. We do not see a broad-based recovery for Chinese shipbuilders yet as (1) rise in BDI was led mainly by rate hikes for capesize vessels, (2) container freight rates remain weak, and (3) yard overcapacity issue lingers. We fear that
YZJ’s recent rise in share price may meet with downward pressure when shipping market recovery story disappoints.
Ø We do not see shipbuilding prices picking up significantly yet. While there may be some short-term spike in new orders, we still see margin contraction and EPS decline for YZJ’s core shipbuilding business for FY13-15F as higher margin contracts are depleted from orderbook.
Ø We agree YZJ would be the best proxy to ride a shipbuilding recovery cycle, but we disagree that this is the turn. We think that the recent lift in valuation is fragile as it is not supported by future EPS growth with margin decline still in the cards.

—————————————

This is the last straw, and below is my response:

———————————-

I generally agree with the big picture assessment that there are dark clouds, and the boom years of fat margins are not here yet. I am also agreeable that next few quarters might disappoint.

But I think we should take a report with a heavy does of salt. Let me explain why.

They have a downgrade target price of $0.98, they would have more credibility had it been a HOLD call all this while with a target of $0.98.

But from a cut from $1.135 when the orders from the next 12 months is already in the orderbook since 2011? How did you get $1.135 at the first place, was it a mistake at the first place? If other facts like increase in price of steel leading to increase in cost will weaken earning going forward in the next 12 months, is a reason cited, then I would say its quality analysis. Hello, how would BDI affect YZJ earnings? It would affect it future order books that will affect earnings from 2015 onwards, and you are cutting your 12 months target based on that?

These analyses of calling sell, and even upgrading “buys” with higher price targets are all a slap in the face of analysts, why is YZJ a $1 call 2 months ago and $1.4 call now? either one is a serious mistake unless you can strongly justify the change. For example,HYPOTHETICAL EXAMPLES ONLY: we expect margins to fall to 15%, but they managed to hold it to 20% and the property devt arm is up and going earlier than expected.(increase target price) Or, CHina is clamping down on shadow banking and wealth management products more agressively than we expect, and we are concerned that there might be some write down on HTM.(Reduce Target price)

BEWARE of all analysts that quote recent orderbook wins as justification to change in 12 months price target. The overriding motive is for you to trade so that they earn commission.

Investing community deserved better analysis by professionals. Below is my thoughts on the “highlights” of the report

——————————————-
(1) rise in BDI was led mainly by rate hikes for capesize vessels,
True, but panamax is increasing significantly too.

(2) container freight rates remain weak,
True.

and (3) yard overcapacity issue lingers.
Do note that the “overcapacity” accounts for the weaker yards too, if you follow order wins in china, it is highly concentrated on the SSOE shipyards and a few other big yards like rongsheng, another one in zhejiang (can’t remember name), it is less than a dozen names. The overcapacity in china is already playing to an end by market forces.

We fear that
YZJ’s recent rise in share price may meet with downward pressure when shipping market recovery story disappoints.
Agree, but whats with you $1.135 target? What makes you shift goalpoles?

Ø We do not see shipbuilding prices picking up significantly yet. While there may be some short-term spike in new orders, we still see margin contraction and EPS decline for YZJ’s core shipbuilding business for FY13-15F as higher margin contracts are depleted from orderbook.
Hello, fat margins orders from 2008 and 2009 are already delivered please stop copying and pasting from other views.

Ø We agree YZJ would be the best proxy to ride a shipbuilding recovery cycle, but we disagree that this is the turn. We think that the recent lift in valuation is fragile as it is not supported by future EPS growth with margin decline still in the cards.
Agree

——————————

As I always say, stay away from short term price distraction, you are buying for a turnaround, wait for the turnaround, don’t care if its a false dawn, unless the false dawn gave you the target price you want.

Hi Greenrookie,

I believe you had read the report wrongly. The $1.135 is the present stock price. Their target price based on their assessment is $0.98.

Their previous target price on 12 Aug was $0.93. Their previous call was HOLD when the share price was $0.94. Now that the price had raised so much, maybe thats why they think it should be a sell?

I do not know exactly how each of those factors quoted going to affect the ship building price, so I just quote their concluding sentence, which I think is the essence of their report.

[quote]
We believe that for a healthy recovery for the Chinese shipbuilding sector, events need to unfold in the following order:

Flushing out of excess shipbuilding capacity -> Firm economic recovery drives shipping demand -> Ship owners place orders for new ships in anticipation of increase in demand -> Increased tightness in shipyard capacities -> rise in shipbuilding prices
[unquote]

True or not, I dunno.

[quote='NTL' pid='63236' dateline='1380789886']
Hi Greenrookie,

I believe you had read the report wrongly. The $1.135 is the present stock price. Their target price based on their assessment is $0.98.

Their previous target price on 12 Aug was $0.93. Their previous call was HOLD when the share price was $0.94. Now that the price had raised so much, maybe thats why they think it should be a sell?

I do not know exactly how each of those factors quoted going to affect the ship building price, so I just quote their concluding sentence, which I think is the essence of their report.

[quote]
We believe that for a healthy recovery for the Chinese shipbuilding sector, events need to unfold in the following order:

Flushing out of excess shipbuilding capacity -> Firm economic recovery drives shipping demand -> Ship owners place orders for new ships in anticipation of increase in demand -> Increased tightness in shipyard capacities -> rise in shipbuilding prices
[unquote]

True or not, I dunno.
[/quote]

Haha me foolish. Then it's right. Haha. This hold analysis followed by sell has more credibility than other that upgrade price targets fast and furious. Thanks for pointing it out NTL

(03-10-2013, 02:08 PM)Greenrookie Wrote:

(03-10-2013, 01:39 PM)CityFarmer Wrote:

desmondxyz Wrote:KE missed the boat so they try to sink it??

The best way to make use of analyst report, is to focus on facts, rather on the conclusion.

IMO, the report is more on timing of market, with a short time view. I view it as there are still chance to buy if you miss the boat previously.

Sent from my GT-I9505 using Forum Runner

I am actually quite amused by both KE report and the flurry of reports upgrading their price targets, with just 1-2 months difference.

The below is reproduced from my blog: (Warning: long post):

----------------

I think its all about getting you to trade to earn commission.

I am not carried away by seemingly upgrades of target prices, I feel that analysts are slapping their own faces.

I saw on a forum an analyst report cut and pasted, it has a sell call, it goes like this:

———————-

Yangzijiang Shipbuilding: Wary of a False Dawn; Cut to Sell, $1.135 – TP
$0.98
YZJSGD SP | Mkt Cap USD3.5b | ADTV USD13.2m

Ø Cut to contrarian SELL, SOTP-based TP at SGD0.98. We do not see a broad-based recovery for Chinese shipbuilders yet as (1) rise in BDI was led mainly by rate hikes for capesize vessels, (2) container freight rates remain weak, and (3) yard overcapacity issue lingers. We fear that
YZJ’s recent rise in share price may meet with downward pressure when shipping market recovery story disappoints.
Ø We do not see shipbuilding prices picking up significantly yet. While there may be some short-term spike in new orders, we still see margin contraction and EPS decline for YZJ’s core shipbuilding business for FY13-15F as higher margin contracts are depleted from orderbook.
Ø We agree YZJ would be the best proxy to ride a shipbuilding recovery cycle, but we disagree that this is the turn. We think that the recent lift in valuation is fragile as it is not supported by future EPS growth with margin decline still in the cards.

—————————————

This is the last straw, and below is my response:

———————————-

I generally agree with the big picture assessment that there are dark clouds, and the boom years of fat margins are not here yet. I am also agreeable that next few quarters might disappoint.

But I think we should take a report with a heavy does of salt. Let me explain why.

They have a downgrade target price of $0.98, they would have more credibility had it been a HOLD call all this while with a target of $0.98.

But from a cut from $1.135 when the orders from the next 12 months is already in the orderbook since 2011? How did you get $1.135 at the first place, was it a mistake at the first place? If other facts like increase in price of steel leading to increase in cost will weaken earning going forward in the next 12 months, is a reason cited, then I would say its quality analysis. Hello, how would BDI affect YZJ earnings? It would affect it future order books that will affect earnings from 2015 onwards, and you are cutting your 12 months target based on that?

These analyses of calling sell, and even upgrading “buys” with higher price targets are all a slap in the face of analysts, why is YZJ a $1 call 2 months ago and $1.4 call now? either one is a serious mistake unless you can strongly justify the change. For example,HYPOTHETICAL EXAMPLES ONLY: we expect margins to fall to 15%, but they managed to hold it to 20% and the property devt arm is up and going earlier than expected.(increase target price) Or, CHina is clamping down on shadow banking and wealth management products more agressively than we expect, and we are concerned that there might be some write down on HTM.(Reduce Target price)

BEWARE of all analysts that quote recent orderbook wins as justification to change in 12 months price target. The overriding motive is for you to trade so that they earn commission.

Investing community deserved better analysis by professionals. Below is my thoughts on the “highlights” of the report

——————————————-
(1) rise in BDI was led mainly by rate hikes for capesize vessels,
True, but panamax is increasing significantly too.

(2) container freight rates remain weak,
True.

and (3) yard overcapacity issue lingers.
Do note that the “overcapacity” accounts for the weaker yards too, if you follow order wins in china, it is highly concentrated on the SSOE shipyards and a few other big yards like rongsheng, another one in zhejiang (can’t remember name), it is less than a dozen names. The overcapacity in china is already playing to an end by market forces.

We fear that
YZJ’s recent rise in share price may meet with downward pressure when shipping market recovery story disappoints.
Agree, but whats with you $1.135 target? What makes you shift goalpoles?

Ø We do not see shipbuilding prices picking up significantly yet. While there may be some short-term spike in new orders, we still see margin contraction and EPS decline for YZJ’s core shipbuilding business for FY13-15F as higher margin contracts are depleted from orderbook.
Hello, fat margins orders from 2008 and 2009 are already delivered please stop copying and pasting from other views.

Ø We agree YZJ would be the best proxy to ride a shipbuilding recovery cycle, but we disagree that this is the turn. We think that the recent lift in valuation is fragile as it is not supported by future EPS growth with margin decline still in the cards.
Agree

——————————

As I always say, stay away from short term price distraction, you are buying for a turnaround, wait for the turnaround, don’t care if its a false dawn, unless the false dawn gave you the target price you want.

Well it is true that analyst produce reports to generate revenue for their respective research houses. However, it is also true that the reports by analysts are laden with key assumptions that may change over time, e.g. revenue growth rate, COGS, CAPEX and discount rate. These make a huge difference in relation to the current price target that an analyst comes up with (play around with discount rates and far in the future numbers and you'll see VERY quickly how sensitive current prices are to these numbers). But that being said, their judgement is probably as accurate as economists judgement, flawed and highly inaccurate but their best possible guess given current facts.

From OCBC Investment Research

Secures more contracts to provide work down the road
Following the announcement of eight shipbuilding contracts in early Sep totaling US$214m, Yangzijiang Shipbuilding (YZJ) has secured 17 more contracts worth about US$871m, bringing total orders won YTD to US$2.096b. The 17 new contracts are scheduled for deliveries in 2015-2016, and provide much-anticipated replenishment of the order book for execution of orders further down the road – indeed the company may
have to rely on a higher volume turnover as it starts executing more of its newer orders (also lower-margin) to maintain the yard’s
profit level. Meanwhile, the group still has a total of 28 options outstanding worth about US$1.36b.

Newbuild prices see slow but steady uptrend
As Exhibits 2 and 3 illustrate, newbuild prices for bulk carriers in Chinese yards have been on a slow but steady uptrend since early this
year. This has been more apparent in the larger ships, such as the Capesize carriers (e.g. US$50m in Sep 2013 vs US$45m in Dec
2012). Indeed, according to RS Platou1, spot earnings for Capesize tonnage rose substantially over the last month due to
higher Chinese iron ore imports. The strength in Capesize has also influenced the Panamax sector positively as charterers started to take
two Panamaxes instead of one Capesize when the spread in freight rates became greater than normal. In the longer term, a gradual recovery in the world economy should drive the demand for tonnage.

http://www.remisiers.org/cms_images/rese..._Pulse.pdf

Not vested in YZJ but will look to buy in when there is a pullback. I see a gradual and slow recovery in the shipping sector.

Less than 3% of Chinese yards win 97% of newbuild orders

http://www.hellenicshippingnews.com/News...371d86a208

-----------------------------------------------

While my numbers in my earlier posts are largely off the mark, the conclusion is the same, the consolidation of excess capacity has already begun.

Excess capacity is a bane for smaller tot medium yards, the top yards will actually benefits from this selective ordering.

(04-10-2013, 10:25 PM)Greenrookie Wrote: Less than 3% of Chinese yards win 97% of newbuild orders

http://www.hellenicshippingnews.com/News...371d86a208

-----------------------------------------------

While my numbers in my earlier posts are largely off the mark, the conclusion is the same, the consolidation of excess capacity has already begun.

Excess capacity is a bane for smaller tot medium yards, the top yards will actually benefits from this selective ordering.

"39 bigger yards took the lion's share of 96.5% in new orders", what a consolidation.

I reckon the fate of the smaller yards after consolidated, not the companies, but the physical yards...

http://www.hellenicshippingnews.com/News...8ecc8cd933

YZJ has sighed LOI to build 2+2x newcastlemax.
Reminded me that LOI is quite meaningless, YZJ sigh LOI to build 10000 TeUs containers for PD, but nothing come out of it.

(17-10-2013, 07:35 AM)Greenrookie Wrote: http://www.hellenicshippingnews.com/News...8ecc8cd933

YZJ has sighed LOI to build 2+2x newcastlemax.
Reminded me that LOI is quite meaningless, YZJ sigh LOI to build 10000 TeUs containers for PD, but nothing come out of it.

Hi Greenrookie,

I read the article and think it is 4+2 valued at USD 55.5 ea. Maybe you can check again.

Hi buddies, need some help from buddies here.

I wasgoogling and baiduing the Jiangsu State Adminstration of Taxes and only get 2008 top 100 tax payers info, see attached.

YZJ is ranked 95 in 2008 and pay taxes of 198 million rmb (see attached)

But their 2007 accounts show they pay 130 million taxes? (http://ir.zaobao.com.sg/yangzijiang/doc/yzj_ar2008.pdf pg 20)

Er... I thought ppl over declare profits but end up paying less taxes, YZJ pay more taxes than declared, why the discrepancy.

YZJ　is the 17th top payer of tax in 2011
http://news.xinmin.cn/rollnews/2012/04/01/14261033.html

YZJ is the 13th top payer of tax in 2012
http://tieba.baidu.com/p/2415945314

I can't find the detailed document for other years from the Jiangsu SAT or the internet thou...

Anyone can explain why??