Yangzijiang Shipbuilding (Holdings)

[CityFarmer]

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!

That is a miracle of China high growth, with an highly inefficient internal credit system, and a controlled capital account. 

There are white elegants around China, and the concern of local gov is more than the short-term money return. Anyway, it is less of a concern to the HTM, IMO, with asset-rich local gov, and secured loans with low LTV.

(vested)

[money]

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

It is unrealistic. Prospective investors should not see it as "wow, the CEO is so smart, he is able to find such good deals in the market". There are very few Buffetts around in this world. IMO, many people do not know how to assess risk

[money]

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!

That is a miracle of China high growth, with an highly inefficient internal credit system, and a controlled capital account. 

There are white elegants around China, and the concern of local gov is more than the short-term money return. Anyway, it is less of a concern to the HTM, IMO, with asset-rich local gov, and secured loans with high LTV.

(vested)

There are 2 sides to a coin and many comments can be made about the 2 sides. At the end of the day, I have shared my perspective. Hope got no hard feelings to those that are vested.  Obviously, you can see that I am not vested. This will be my last post on yzj, hopefully, I am just too pessimistic and events don't turn out the way I see it. I am a normal working employee so I understand how painful losses are. Thanks for all the intellectual exchange. Good luck.

[CityFarmer]

There are 2 sides to a coin and many comments can be made about the 2 sides. At the end of the day, I have shared my perspective. Hope got no hard feelings to those that are vested.  Obviously, you can see that I am not vested. This will be my last post on yzj, hopefully, I am just too pessimistic and events don't turn out the way I see it. I am a normal working employee so I understand how painful losses are. Thanks for all the intellectual exchange. Good luck.

Yes, I do respect diversification in view. I have posted, to ensure both sides were presented here.

I am a follower of Peter Lynch, and one thing I have learned from him, is be flexible and open-minded but caution on investment.

Good luck to you too.

(vested, and understand the pain of losses too)

[fundamentalman]

better avoid now. i think it would take many years to clear the shipping glut.

chinese govt action that subsidiize the industry with cheap loans only prolong the downturn.

I heard the chairman said that steel is cheaper than cabbage now, but 3-4 yrs from now, it could still be cheaper than cabbage (unless major bankruptcies amongs major players happen in the near term).

[CityFarmer]

The China is shifting the shadow bank risk, to "official" municipal bonds via debt-swap programme. The company HTM investment, will likely be reduced with the shifting. Local governments are the largest creditor of the HTM investment, which have the lowest risk due to the bailout, IMO.

(vested)

China's 2015 bond issuance surges to 22.3 trillion yuan: central bank
26 Jan 2016 09:46
[SHANGHAI] China's total bond issuance jumped to 22.3 trillion yuan (S$4.85 trillion) in 2015, up 87.5 per cent from the previous year, official figures showed, driven by a new debt-swap programme introduced last year and strong corporate issuance.

Local governments issued 3.8 trillion yuan of municipal bonds, while policy banks issued 2.6 trillion yuan of bonds, according to data released late on Monday by the People's Bank of China on its website.

Issuance in the larger interbank market was 21 trillion yuan, up 81.3 per cent on the year, with the remainder issued through the smaller exchange traded markets.

A main factor driving the increase was China's massive new local government debt swap programme, initiated in March 2015, to help indebted municipal and provincial governments refinance expensive debt.
...
REUTERS

Source: Business Times Breaking News

[CityFarmer]

It is indeed rare, on order from the state-owned ship owner.

(vested)

Yangzijiang Awarded New Shipbuilding Orders for Six 400,000 DWT VLOCs with a Total Value of USD510 Million

 400,000 DWT VLOCs are the largest dry bulk carriers ever awarded to the Group
 Orders were placed by ICBC Leasing, marking a rare case where a state-owned ship owner in China places orders with a private shipyard
 Strong enhancement to Group’s outstanding order book and endorsement on Group’s strong reputation and shipbuilding capabilities 
...
http://infopub.sgx.com/FileOpen/YZJ%20Pr...eID=398709

[shadow_walker]

It is indeed rare, on order from the state-owned ship owner.

(vested)

Yangzijiang Awarded New Shipbuilding Orders for Six 400,000 DWT VLOCs with a Total Value of USD510 Million

 400,000 DWT VLOCs are the largest dry bulk carriers ever awarded to the Group
 Orders were placed by ICBC Leasing, marking a rare case where a state-owned ship owner in China places orders with a private shipyard
 Strong enhancement to Group’s outstanding order book and endorsement on Group’s strong reputation and shipbuilding capabilities 
...
http://infopub.sgx.com/FileOpen/YZJ%20Pr...eID=398709

Both the container ships and bulk carriers are in a bad shape.

One reason why the Chinese shipbuilders are still receiving orders is the Chinese policies of subsidizing new shipbuilding.

The government is subsidizing Chinese shipowners to scrap their bulk carriers for RMB 1,500 per gross registered ton. 50% will be received on completion of scrapping and another 50% when a new ship is ordered from the Chinese shipyard. Cosco pacific receives substantial other income from scrapping for 2015.

This policy will end in 2017 and might distort competition and recoveries in the future.

[CityFarmer]

It is indeed rare, on order from the state-owned ship owner.

(vested)

Yangzijiang Awarded New Shipbuilding Orders for Six 400,000 DWT VLOCs with a Total Value of USD510 Million

 400,000 DWT VLOCs are the largest dry bulk carriers ever awarded to the Group
 Orders were placed by ICBC Leasing, marking a rare case where a state-owned ship owner in China places orders with a private shipyard
 Strong enhancement to Group’s outstanding order book and endorsement on Group’s strong reputation and shipbuilding capabilities 
...
http://infopub.sgx.com/FileOpen/YZJ%20Pr...eID=398709

Both the container ships and bulk carriers are in a bad shape.

One reason why the Chinese shipbuilders are still receiving orders is the Chinese policies of subsidizing new shipbuilding.

The government is subsidizing Chinese shipowners to scrap their bulk carriers for RMB 1,500 per gross registered ton. 50% will be received on completion of scrapping and another 50% when a new ship is ordered from the Chinese shipyard. Cosco pacific receives substantial other income from scrapping for 2015.

This policy will end in 2017 and might distort competition and recoveries in the future.

Yes, the SOEs are benefiting from the subsidy, but not directly for YZJ.

[CityFarmer]

Early sign of a shipping sector recovery?

Singapore port notches year's first rise in box throughput
15 Jun 2016 09:00
By Tan Hwee Hwee

TOTAL container throughput in the Port of Singapore rose in May compared to May a year ago, in the first year-on-year rise since the start of this year.

Preliminary estimates released by the Maritime and Port Authority (MPA) of Singapore show that the port handled more than 2.665 million 20 foot equivalent units (TEUs) of containerised cargo last month, up from 2.622 million TEU in May 2015.

The container throughput for the month was also higher than that for April, at 2.528 million TEU.
...
Source: Business Times