Yangzijiang Shipbuilding (Holdings)

[Sampling]

SHIPBUILDING CONTRACTS WITH SEASPAN CORPORATION

http://info.sgx.com/webcoranncatth.nsf/V...A002E7A0B/$file/Announcement_ShipbuildingContracts.pdf?openelement

Cosco secured US$0.7 billion contract to build 7 X 10,000 TEU vessels for Seaspan Corp. The contract comes with options to purchase 18 X 10,000 TEU vessels for US$1.8 billion. The vessels will be delivered in 2014 - 2015 and will most likely be built on YZJ new yard (under development). While the gross margin is unlikely to be as fat as pre-crisis contracts, the sheer size of the contract should generate sufficient profit to maintain its growth. Execution and teething problems will be a big risk though.

(Not Vested)

You mean YZJ secured this righT? Not Cosco...

[Nick]

Yangzijiang entered into agreement with Peter Döhle and China Development Bank & also into a LOI for new orders

- Up to USD 1 billion of financing can be provided by China Development Bank to Peter Döhle in relation to vessel purchase contracts to Yangzijiang

- Yangzijiang also entered into a LOI with Peter Döhle to build eight 10,000 TEU container vessels

http://info.sgx.com/webcoranncatth.nsf/V...800020F8E/$file/YZJ_PressRelease230611.pdf?openelement [Press Release]

YZJ is trading at $1.42 or a market capitalization of S$5.4 billion.

(Not Vested)

[Musicwhiz]

For the sake of completeness, attached is the link back to interviews with S-Chips CEOs (Yangzijiang).

http://www.valuebuddies.com/thread-1247.html

(Not Vested)

[Nick]

YZJ Management Corporate Updates

http://info.sgx.com/webcoranncatth.nsf/V...10083B6DE/$file/YZJ_Announcement_update.pdf?openelement

Management seeks to defend the sliding share price by clarifying against market rumour and hints at share buy backs.

(Not Vested)

[D123]

It is curious that a company that is rich in cash and financial assets would need to raise external financing. (Or at least the fact that their bankers think so).

[Nick]

It is curious that a company that is rich in cash and financial assets would need to raise external financing. (Or at least the fact that their bankers think so).

I believe financing is needed to build a ship since the bulk of the payment comes at delivery. The financial assets are matched exactly by the deposits from clients for construction contracts.

It must be noted in 2008, YZJ repurchased 228 million shares when its share price tumbled below $1.10. Will they do so again ?

[Musicwhiz]

Management seeks to defend the sliding share price by clarifying against market rumour and hints at share buy backs.

Management should have better things to do than to comment on share price and to "defend" it. Unless, of course, they are planning for something which involves the share price?

[karlmarx]

such announcements are indeed few, and far in between. yzj's management appears overly concerned with defending their falling share price, to the extent of 'threatening' shortists with share buybacks. wilmar was probably the last time a blue chip was heavily shorted, about 7 months back. wilmar's share price was stabalised only after insiders themselves started buying from the open market, and without alluding to any share buyback programme. if yzj's management wanted to prove the point that their share is deeply undervalued, why don't they put their money where their mouth is?

[D123]

I believe financing is needed to build a ship since the bulk of the payment comes at delivery. The financial assets are matched exactly by the deposits from clients for construction contracts.

It must be noted in 2008, YZJ repurchased 228 million shares when its share price tumbled below $1.10. Will they do so again ?

Yup, but my question is why convertible bonds instead of normal debt? Usually convertibles are used only when companies are not able to obtain regular debt financing.

Also, instead of parking the customer deposits in financial assets, they can take it out and finance the shipbuilding right? (the optimistic perspective is that these financial assets can safely yield 10%, and the company can obtain debt financing at lower than 10%)

Currently they have an order book of about US$6.1bn (RMB 39.65bn). Let's assume half of this is to be delivered in a year's time (RMB 19.825bn), and that margins are about 10%. With the cash holdings of RMB 5bn and the financial assets of RMB 10bn, and/or a little more payments from customers, and/or regular bank loans, they should be able to finance the cost of building half the order book quite easily (RMB 17.84 bn).

Of course, I'm assuming that they are even considering convertibles in the first place. Could be that the bankers are just too free.

[D123]

BUSINESS TIMES
Published July 19, 2011

Yangzijiang shares dive to a 13-month low
Plunge could be due to weak outlook for bulk carriers and eurozone debt crisis

By JOYCE HOOI

YANGZIJIANG Shipbuilding Holdings' stock price hit a 13-month low yesterday, losing 5.7 per cent - or 7.5 cents - in heavy trading and closing at $1.235.

Even as the ostensible reason for the sell-off remained the bleak outlook for the bulk carrier sector - which accounts for a large portion of Yangzijiang's revenue - analysts were hard-pressed to explain the depth of the stock price's plunge.

'The only reason I've heard is that the outlook is pretty weak for the bulk carriers. But this has been known for awhile. The share price correction has been more severe than anyone has expected,' said Jason Saw, an analyst with DMG & Partners Research.

The bulk carrier sector's woes have been well-documented over the last several months. In a report earlier this month, Jon Windham of Barclays Capital Research noted that new orders for dry bulk carriers for the first half of the year had fallen by 72 per cent year on year.

For the first half of 2011, the Baltic Dry Index had averaged 1,375, 41 per cent lower year on year.

For Yangzijiang, revenue from the multipurpose/mini bulker segment accounted for almost 65 per cent of its total revenue last year.

While traders quoted by Reuters said that the eurozone debt crisis could also be weighing on Yangzijiang's stock price because of its European customers, DMG's Mr Saw does not think that is the case.

'The whole eurozone thing shouldn't directly impact the stock that much. They have some Greek customers, but they take 20 per cent downpayment for their orders, with payments in five equal parts of 20 per cent each. I would suppose that it wouldn't be so negatively affected,' Mr Saw said.

'I don't think earnings will collapse in the near-term, so the share price should be supported by that.'

Mr Saw currently has a 'buy' rating on the stock with a target price of $1.98.

Another analyst with a local outfit was similarly baffled by the beating taking by Yangzijiang in the market, but suggested that there might have been concerns in the market about Yangzijiang's investments.

'Quite a significant portion of its earnings is from financial investments. So, maybe some people are wondering whether this can be sustainable,' the analyst said. Even then, he believed there was little cause for concern.

'According to management, they invest in held-to-maturity assets. In that sense, it's also backed by the bank, (so) it should be safer than pure equity investing.'

As at the end of last year, the group had 5.19 billion yuan (S$977.19 million) worth of held-to-maturity financial assets on its balance sheet, up from just 1.71 billion yuan in 2009.