Yangzijiang Shipbuilding (Holdings)

[cyclone]

Yangzijiang starts share buyback, affirming confidence in the value of the company

Highlights :
1. Despite strong order book and stable operations, share price decreased by 13% in a week to 15-month low
2. As of 31 March, 2018, Yangzijiang had an outstanding order book of USD4.5 billion
3. Yangzijiang bought back 5,000,000 shares in open market on 30 May 2018
4. With cash and cash equivalents of RMB5.6 billion and net cash position, Yangzijiang is ready to conduct ongoing share buyback on price weakness
5. Shipbuilding market sentiment remains positive, Yangzijiang is confident in building up its order book at healthy pace.

More details in http://infopub.sgx.com/FileOpen/Press%20...eID=507995

[Ray168]

Prudent Accounting Minimizes Downside Risk


Following HSBC’s report on Yangzijiang with a “reduce” rating published on May 24, Yangzijiang’s share price dropped by 12% in two trading days, to 95 Singapore cents.

However, Yangzijiang's fundamentals are robust. 

It has an outstanding order book of USD4.5 billion, which gives it a stable revenue stream for the next 2.5 years. Enquiry levels from ship owners remain healthy. Its management has said that it is not taking low-margin orders.

Yet the stock price has come down by more than 35% year-to-date. Is this an over-reaction? Is it a good opportunity to accumulate Yangzijiang shares, given that it is now trading around its 52-week low?

To find out, I spoke with CFO Liu Hua, who highlighted that Yangzijiang’s shipbuilding business is running stable, with yard utilization of around 90%.

[cyclone]

Yangzijiang receives nine new orders in May, bringing year-to-date new orders to USD846 million

Highlights :
* Group secured new orders for nine vessels in May 2018, including two 82,000DWT dry bulkers, two 208,000DWT dry bulkers and five 12,000TEU containerships for USD578 million
* The new orders further proved Yangzijiang’s strong market position in building large-size containerships and dry bulkers
* In April and May 2018, Group delivered 18 vessels in total, primarily large containerships and dry bulkers
* As of date of announcement, the Group has an outstanding order book of USD4.1 billion for 115 vessels, which will keep the Group’s shipbuilding facilities highly utilized till 2020. 

More details in http://infopub.sgx.com/FileOpen/Press%20...eID=508695

[BlackCat]

I like this stock:
- I think its plausible that container/bulker have started to turn around, after the previous peak in 2010.
- Yangzijiang seems to be effecient at what they do, and gained market share from 1% in 2008 to 4% now.
- And has no debt. Rare in this industry.
- The stock is cheap, trading almost at net cash.
- The market is punishing EM stocks now, esp. China. Trade war & strong USD. When do these fears reverse?

The only things that bothers me is their 12-18% return on financial assets. Wouldn't be surprised if one day they have to write off some.

If I buy, it would be limited to a 1% speculative position.

[choonlim]

I like this stock:
 - I think its plausible that container/bulker have started to turn around, after the previous peak in 2010.
 - Yangzijiang seems to be effecient at what they do, and gained market share from 1% in 2008 to 4% now.
 - And has no debt.  Rare in this industry.
 - The stock is cheap, trading almost at net cash.
 - The market is punishing EM stocks now, esp. China.  Trade war & strong USD.  When do these fears reverse?

The only things that bothers me is their 12-18% return on financial assets.  Wouldn't be surprised if one day they have to write off some.

If I buy, it would be limited to a 1% speculative position.

Well, they don't earn 12-18% return on financial assets. ROE for these fin assets for past 5 years is around 10%. 

For the what if of write off , they have provided about 10% allowance for impairment.

[BlackCat]

Well, they don't earn 12-18% return on financial assets. ROE for these fin assets for past 5 years is around 10%. 

For the what if of write off , they have provided about 10% allowance for impairment.

Thanks,

After looking more closely, I have allowances of 9.2% of their HTM at end 2017.  And interest earned of 8.6%.
These numbers look more reasonable.  Hopefully any potential problems are already reflected in the balance sheet.

The stock is currently its priced as though the market thinks it may not survive.  At this price, its worth a bet.

[choonlim]

Well, they don't earn 12-18% return on financial assets. ROE for these fin assets for past 5 years is around 10%. 

For the what if of write off , they have provided about 10% allowance for impairment.

Thanks,

After looking more closely, I have allowances of 9.2% of their HTM at end 2017.  And interest earned of 8.6%.
These numbers look more reasonable.  Hopefully any potential problems are already reflected in the balance sheet.

The stock is currently its priced as though the market thinks it may not survive.  At this price, its worth a bet.

Haha, you could have got it cheaper just not long ago. I think the price of YZJ is driven by market sentiment on its outlook of shipbuilding business; even though HTM assets occupy bulk of sum-of-the-parts valuation.

[touzi]

Chairman Ren has donated his own shares to reward his staff.  This is using his personal resources to motivate employees.

https://links.sgx.com/FileOpen/YZJ-Press...eID=552064

[Big Toe]

Excellent move. Instead of issuing performance shares/increasing the number of shares and thus diluting the stake of shareholders, he choose to transfer/donate his own shares to the staff. While the direct impact may not be felt immediately, the positive signals it sends out to shareholders and its staff is loud and clear.

[Ray168]

YZJ tanked ~20% this morning and call for trading halt.

Rumors are circulating that the chief of Yangzijiang Shipbuilding, Ren Yuanlin, has been "missing" for over two months and is under investigation by Chinese authority for association of the corruption case involving Liu Jianguo, the former party secretary of City of Jiangyin and Jingjiang, where Yangzijiang Shipbuilding has grown from a shabby ship repair yard into a family owned ship-building giant.

The time Liu Jianguo was in office coincides with Yangzijiang's aggressive expansion of business and its diversification into financing business, which are strictly regulated in China by licensing requirement, and is often seen as proof of "strong government connections". 

The company has been silent about the whereabouts of its chief.