Yangzijiang Shipbuilding (Holdings)

[Greenrookie]

The company half year report is announced.

Yangzijiang remains profitable amid industry turmoil, reports RMB811.7 million in earnings for 2Q2013
 Group revenue increased 12% in 2Q2013 mainly due to higher revenue recognition from construction of larger vessels
 Healthy gross profit margin of 27%; core shipbuilding margin remains strong at 21%
 Strong order book momentum despite weak shipbuilding industry, US$1.0 billion worth of newbuild contracts secured in 1H2013
 Outstanding order book comprised of 71 vessels worth US$3.24 billion

http://infopub.sgx.com/FileOpen/Announce...eID=251254

Few things I like happening in this quarter:

Zero bad loans

10000 TEUs expected first delivery in late 3Q, so in another 1 month or so.

I believe the fat margins of peak years orders are already done, and this quite be near or already the bottom of margin barring escalation of costs.

Another quarter positive OCF, cash is now 5billion.

55% of collateral is land or properties in jiangsu. With their property arm developing, as they do have a contingency plan I HTM turn sour
What I hope to see:

Bigger order book and the drawn down of HTM to facilitate their core business.

[Greenrookie]

YZJ lost the crown of building the biggest ship in china.

http://www.sinoshipnews.com/news_content...d=3w3c1700


Jiangnan Changxing signs 16,000 teu boxships

There are to be delivered at sept 2015. Just 2 years. Wow

[CityFarmer]

Kim Eng report, TP S$0.93, rating HOLD

2Q13 within expectations, maintain Hold. Yangzijiang (YZJ) reported 2Q13 revenue of CNY4,422m (+12% YoY, +54% QoQ) with corresponding PATMI of CNY812m (-8% YoY, +13% QoQ). 1H13 PATMI made up 54% of our FY13F forecast. We had forecasted 2Q13 PATMI of CNY707m in our results preview, but we view this set of results as within expectations as we attribute the variance to recognition timing of shipbuilding contracts. We maintain our Hold call with unchanged TP of SGD0.93.

Superior shipbuilding margins. While shipbuilding gross margin dipped sequentially to 21% (1Q13:26%), this is still higher than industry given the single-digit margins we see for many Chinese shipbuilders. We attribute YZJ’s superior margins to its discipline in order intake, resisting taking in loss-making orders. However, we expect margins to continue to decline sequentially as yard utilisation trends lower due to depletion of its outstanding orderbook.

Potential order wins from outstanding options. YZJ has secured about USD1.0b of new orders in 1H13, bringing net orderbook to about USD3.24b. Our full-year forecast is for USD1.3b in new orders. There are 47 outstanding options worth about USD2.54b that are not yet exercised by its customers, and this could support part of its order intake. Management is optimistic that more of these options would be exercised in 2H13.

Maintaining its HTM investment strategy. The company will continue to invest in HTM assets to counter the shipbuilding downturn. HTM asset now stands at CNY12.2b. About 60% of the capital is recycled and reinvested every year. YZJ states that default rates were less than 5% and most could be recovered through sale of collaterals, but we remain cautious.

No much downside but no catalysts to re-rate yet. We do not see much downside given the low valuations (7.0x FY14F PER, 1.0x P/B) of the stock. However, we also do not see any near-term re-rating catalysts given that the outlook for Chinese shipbuilding sector remains depressed. No changes in our estimates and TP. Maintain Hold.

http://remisiers.org/cms_images/research...KE_YZJ.pdf

[yogi]

Being contrarion, I recenlty started taking interest in shipping industry as it has been in worst condition for last few quarters in more than two decades.

I specifically like this company due to its management (disciplined, shoreholder value creation attitude, operational execution excellence) and above industry everage margins, ROE/ROA and recenlty diversified businesses.

Looking at following few aspects, probability of integrity issue of financial statements should be very low.
- Most Transparent SIAS Investors Choice award last two years
- Mr. Ren awarded E&Y entrepreneur (hoping that E&Y has done due-delignce of company's financial statements)
- MR. Ren donated his significant shares to charity

However still above doesn't give guarantee the integrity of the financial statements especially this being Chinese company.

Being Chinese company, I am still scared about some possibility (may be very small) of integrity issue of its financial statements, especially looking at its huge HTM investment & micro finance. These assets are best way to hide dubious profit.

I have seen last few pages of this thread however no one discussing about this aspect.

Those who are associated with this company for long time, any thoughts would be appreciable. Thanks.

Looking forward to meet Mr. Ren in next AGM.

[Greenrookie]

Being contrarion, I recenlty started taking interest in shipping industry as it has been in worst condition for last few quarters in more than two decades.

I specifically like this company due to its management (disciplined, shoreholder value creation attitude, operational execution excellence) and above industry everage margins, ROE/ROA and recenlty diversified businesses.

Looking at following few aspects, probability of integrity issue of financial statements should be very low.
- Most Transparent SIAS Investors Choice award last two years
- Mr. Ren awarded E&Y entrepreneur (hoping that E&Y has done due-delignce of company's financial statements)
- MR. Ren donated his significant shares to charity

However still above doesn't give guarantee the integrity of the financial statements especially this being Chinese company.

Being Chinese company, I am still scared about some possibility (may be very small) of integrity issue of its financial statements, especially looking at its huge HTM investment & micro finance. These assets are best way to hide dubious profit.

I have seen last few pages of this thread however no one discussing about this aspect.

Those who are associated with this company for long time, any thoughts would be appreciable. Thanks.

Looking forward to meet Mr. Ren in next AGM.

Hi Yogi,

There is no way to ascertain 100% the financial numbers are fraud proof.

But there are a few things which I take comfort with besides what you mentioned.

1) with the exception of 2011, YZJ is generating postive FCF from its core shipbuilding business since IPO.
2) Annual generous dividends, since IPO, they have already given 22.1 cents of dividends.
3) YOu can track their delivery of ships, signing of deals, even when they say the find new buyers for their vessels, you can check if it indeed happens through the reports, hellenics shipping website provide. In fact, there are times I know YZJ closed a deal earlier than YZJ announced them due to the weekly updates from that website. That you can compare the details and see if YZJ is up to some funky business.

I know HTM is a sore point, I myself have no way of verifying it. So you have to decide if the risk is worth it.

[CityFarmer]

Hi Yogi,

There is no way to ascertain 100% the financial numbers are fraud proof.

But there are a few things which I take comfort with besides what you mentioned.

1) with the exception of 2011, YZJ is generating postive FCF from its core shipbuilding business since IPO.
2) Annual generous dividends, since IPO, they have already given 22.1 cents of dividends.
3) YOu can track their delivery of ships, signing of deals, even when they say the find new buyers for their vessels, you can check if it indeed happens through the reports, hellenics shipping website provide. In fact, there are times I know YZJ closed a deal earlier than YZJ announced them due to the weekly updates from that website. That you can compare the details and see if YZJ is up to some funky business.

I know HTM is a sore point, I myself have no way of verifying it. So you have to decide if the risk is worth it.

I agree with you. The HTM segment deserves more attention, than shipbuilding segment.

IMO, HTM (cum micro-finance) as a long term strategy, might be beneficial to the company as well as shareholders. Financial muscle is critical in shipbuilding, and a critical moat. Its business model is sound within China credit environment, and will not die-off in near future...

(vested)

[specuvestor]

IMHO I think YZJ is an alpha stock in shipbuilder when we see the likes of Rongsheng, and getting out unscath with Wenzhou blowup. Most importantly still paying good dividend so there is cashflow and not just paper. But taht also means that I have to be positive on the shipping industry to buy this alpha stock.

Problem is, we need to value part of it like a finance company which I see very little discussion from the broking community. Valuing Courts as a consumer product company would have missed the point.

[yeokiwi]

Looking at following few aspects, probability of integrity issue of financial statements should be very low.
- Most Transparent SIAS Investors Choice award last two years

http://www.taipeitimes.com/News/worldbiz...2003214016

Before China Aviation Oil blew up in 2004, it was awarded the most transparent award by SIAS.

and...
ACCS is the runner up in the NEW ISSUES (SINCE AUGUST 2002) CATEGORY.

http://www.sias.org.sg/cgweek2012/ICA_PW...TCA03.html

and..
China Hongxing Sports Limited is the runner-up in Category N: New Issues 2006

and..
Jurong Technologies Industrial Corporation Ltd is the runner-up in Category C: Technology & Electronics 2004 2006

[CityFarmer]

IMHO I think YZJ is an alpha stock in shipbuilder when we see the likes of Rongsheng, and getting out unscath with Wenzhou blowup. Most importantly still paying good dividend so there is cashflow and not just paper. But taht also means that I have to be positive on the shipping industry to buy this alpha stock.

Problem is, we need to value part of it like a finance company which I see very little discussion from the broking community. Valuing Courts as a consumer product company would have missed the point.

Mr. specuvestor, we have something in common today...

Valuing YZJ, without a proper valuation on its HTM cum micro-finance i.e. the investment segment, is incomplete IMO

IMO, the investment segment shouldn't be valued ONLY on its supporting role, rather as an independent businesses as well, with a promising prospect, at least in mid-term.

At the moment, YZJ is valued at PE of 5, PB 1, with more than 5% dividend yield. I assume Mr. Market is valuing YZJ, by taking the investment segment as cash reserves with a high discount. One other likely factor should be due to its S-Chip status.

(vested)

[CityFarmer]

It seems that the orders are coming back... With its financial strength and capacities, YZJ may be the first choice in China for shipowners...

(vested)
------------
The Board of Directors (the “Board”) of Yangzijiang Shipbuilding (Holdings) Ltd (the “Group” or the “Company”) is pleased to announce that following four (4) options consisting of two (2) 82000DWT and two (2) 64000DWT bulk carriers became effective in July 2013 as announced on 7th August 2013, there is further four (4) options with an aggregate value of US$ 110.4 million converted into effective orders (the “Contracts”) in August 2013.

The new effective Contracts comprise of two (2) units of 1,100 TEU containerships and two (2) unit of 82,000 DWT bulk carries; whereby such vessels are scheduled for deliveries in year 2015, and therefore will not have any significant impact on the earnings of the Group for the financial year ending 31 December 2013.

In first two months of 2H2013, the Group had secured a total of eight (8) effective shipbuilding contracts with an aggregate value of US$0.214 billion. Year to date, a total of thirty five (35) shipbuilding contracts amounting to US$1.22 billion had come into effective.

As of the announcement day, the Group has a total of 51 options worth US$2.87 billion entered with its respective buyers, of which 22 options are for containerships worth US$1.79 billion and 29 options are for multi-purpose bulk carriers worth US$1.08 billion.
...
http://infopub.sgx.com/FileOpen/Announce...eID=255140