Yangzijiang Shipbuilding (Holdings)

(04-04-2014, 10:08 AM)CityFarmer Wrote:

(03-04-2014, 05:52 PM)Greenrookie Wrote: City farmer, perhaps can u share how u research and the questions u asked. Jiangsu where YZJ is based is one of the richest but also heavily geared province too, I read somewhere (can't remembers where) that there is a company at jiangsu ( coal or property company, can't remember) that can't pay interest.

My views on the YZJ's investment and related questions/answers were already posted previously in this thread.

May be a more relevant one is , What if I am wrong?

My answer in my record was

Base on shipbuilding business outlook, and discounted the contribution from the investment on its margin, a conservative estimation of shipbuilding segment's earning was 2800 mil yuan in FY14. With a PE of 7 gives 19.6 billion yuan. With share base of 3832 million shares, it is about 5 yuan per share, or approx $1.05 per share.

If I am right on the valuation, I got the investment segment for free with $1.05 per share.

(vested)

My thoughts were:

In the case whereby some of its HTM defaults, the number impact on YZJ should be manageable since most of the loans are to SOEs. If many big companies and SOEs are failing, every counter in SGX should see a bloodbath, never mind yZJ.

What I cannot calculate is the sentiments impact on price of YZJ. Just a 10% defaults and 5% write off would do far greater damage than the number of loss. I thought then it might be a great time to accumulate with good MOS.

Just a thought, not saying it will happen. I rather it not happen as my guts must be intact then. Still vested with same amount.

A quick look at the AR throw up some interesting facts:

The HTM is no longer made up of mostly of 1 year investment. (See note 15)

2013 2012
Within one year 8,343,505 8,047,060
Between one year to two years 4,361,700 3,362,900
Over two years 2,056,740 620,000

A big increase of investment whose maturity is over 2 years (15%). Maybe some "refinancing" behind the doors? It is fine with me as long as there are no surprises.

There also do not break down the HTM by yield anymore (Hope I didn't miss it )

Impairment is minimum
As at 1 January 653,250 554,280
Allowance made 587,220 405,196
Allowance reversed (605,876) (306,226)
As at 31 December 634,594 653,250

Prudence of type of collateral
Collateralised by: 2013 2012
– Listed shares in PRC 877,000 130,000
– Restricted shares of listed companies in PRC 150,000 230,000
– Unlisted shares in PRC 1,781,440 2,646,000
– Properties and land use rights 8,535,505 6,498,960
– Guaranteed by non-related corporations 3,418,000 2,525,000
14,761,945 12,029,960

If you ask me, rightly or wrongly, I think shares are the most useless collateral as the shares will most be probably be worthless when the company go bust. Glad shares as a collateral is reducing even though HTM is increasing.

http://qz.com/193565/a-billion-dollar-de...ipbuilder/

UNDER WATER
A billion-dollar default looms for China’s biggest private shipbuilder
By Gwynn Guilford @sinoceros March 31, 2014

That sinking feeling. Reuters/Aly Song

With Chinese steelmakers and solar companies struggling to pay off debts, it was only a matter of time before shipbuilding, China’s other notoriously indebted sector, began flailing publicly. Sure enough, China’s biggest private shipbuilder, Rongsheng Heavy Industries, today announced an 8.9-billion-yuan ($1.4-billion) net loss for 2013 (paywall)—its second consecutive annual loss.
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The company, which builds iron ore cargo ships for the Brazilian mining firm Vale, revealed that it is in discussions with 10 banks—including Bank of China, China Minsheng Bank and China Development Bank—to extend deadlines on 10 billion yuan of debt. And that’s just the most urgent batch of loans; its total obligations exceed 22.4 billion yuan, more than half of which is due within 12 months.
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Since listing in 2010 on the Hong Kong Stock Exchange, the company has lost 90% of its value; it’s now worth around HK$8.9 billion ($1.2 billion), as the chart below shows.
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​
How did Rongsheng get into such dire straits in the first place?
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To stave off the effects of the global economic slowdown that followed the 2008 financial crisis, the Chinese government stimulated the economy through trillions of dollars in lending.
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This lending boom dovetailed nicely with one of the Chinese government’s stated ambitions: to become the planet’s biggest shipbuilder by 2015. The resulting credit-fueled over-investment in the sector saw China ramp up to 1,647 shipyards as of 2012, compared with the 10 to 15 that South Korea and Japan have, according to Moody Analytics (pdf, p.2).
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Rongsheng benefited handsomely; between 2007 and 2012, Rongsheng’s assets leapt sevenfold, thanks in large part to the policy-directed loan bonanza. The company reported impressive revenue growth and fat profits in 2010 and 2011 and continued to expand capacity.
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​China Rongsheng’s one-year expected default frequency (EDF) measure. Moody's Analytics
The company has a plan to keep afloat. It’s continuing to slash management salaries, having already cut around four-fifths of its workers in two years. Rongsheng now says it is hoping for a 3-billion-yuan injection from its billionaire founder, who happens to be its biggest shareholder. The company is buying itself some time by issuing convertible bonds. In January, the company sold HK$1 billion in dim sum bonds (debt securities denominated in yuan but issued offshore, typically in Hong Kong). It’s planning another sale in April.
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This aligns with one of the company’s top priorities of the moment, said Bank of America/Merrill Lynch analyst Jacqueline Li in a note on Friday—namely, to issue more convertible bonds. It’s a handy way of keeping the cash coming in even as ship orders dwindle. The HK$3.4 billion in convertible bonds Rongsheng has sold since mid-2013 implies a pretty significant dilution of equity, should these be converted to shares. Li notes that its other priorities are rolling over its short-term bank loans and finding strategic investors.
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Anybody have any idea if Yangzijiang is among the top 10 shipbuilding company in China.

Going by google, cant seem to find her name in wiki.

(06-04-2014, 04:29 PM)Ken123456 Wrote: Anybody have any idea if Yangzijiang is among the top 10 shipbuilding company in China.

Going by google, cant seem to find her name in wiki.

Maybe u can find your answer here... angmo not so sure?

http://www.nextinsight.net/index.php/sto...target-145

(06-04-2014, 04:29 PM)Ken123456 Wrote: Anybody have any idea if Yangzijiang is among the top 10 shipbuilding company in China.

Going by google, cant seem to find her name in wiki.

According to Ren, yZJ is the top 5 yard in china. I am not sure what is the benchmark for top 10. If it is profitability, it was the top in 2012. In terms of capacity, I think the SOE ship builders are biggest. Rongsheng is the biggest private shipbuilder, but is in trouble.

My take: yZJ is the top private shipbuilder, one of the most profitable, and while its capabilities might not be as diverse as the state own yards, it is definitely among the top 10 in china. The fact that it gets it high tech enterprise tax incentive status approved so quickly is no mean feat, helped by the fact that they are among the top contributors of tax revenue to jiangsu govt.

Just take note to check how much deposit clients have to put. I read it is 20% norm but in China, many shipbuilders accept 5% deposit in order to clinch deals.....So if YZJ takes only 5% then the risk is definitely higher and when you compare shipbuilders across the sector, it is not comparing apple to apple......

my two cents worth. Not vested

Allow me to just add on through a quick review by silly investor.

http://www.stokflok.com/content/annual-r...nd-venture

(07-04-2014, 08:50 AM)Behappyalways Wrote: Just take note to check how much deposit clients have to put. I read it is 20% norm but in China, many shipbuilders accept 5% deposit in order to clinch deals.....So if YZJ takes only 5% then the risk is definitely higher and when you compare shipbuilders across the sector, it is not comparing apple to apple......

my two cents worth. Not vested

IIRC, YZJ doesn't take orders with less than 10% downpayment. They prefer 20%, and lower only for those with newer technologies. The info was from the Chairman, during a AGM.

Commercial Banks Wary about Credit for Shipbuilders
http://english.caixin.com/2014-04-10/100663552.html

(07-04-2014, 08:50 AM)Behappyalways Wrote: Just take note to check how much deposit clients have to put. I read it is 20% norm but in China, many shipbuilders accept 5% deposit in order to clinch deals.....So if YZJ takes only 5% then the risk is definitely higher and when you compare shipbuilders across the sector, it is not comparing apple to apple......

my two cents worth. Not vested