Yangzijiang Shipbuilding (Holdings)

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(25-04-2022, 10:34 AM)Big Toe Wrote: YZJ is one of my core holdings so my opinion expressed is honest and very very biased at the same time. Some updates.

Previously there is no way to correctly predict how much market will value post spilit but now that the  is half done, we have some clue. Also while the long term trends are in line with earnings and outlook, the short term share price moverments are very volatile.

Shipbuilding arm is currently valued at ard 1X book. Earnings is very likely to be good for Q1 and the rest of the year barring unforeseen events which was highlighted in previous post. Taking cue from what is happening right now, the financial arm is likely to be valued ard $1 as well. Taken together, YZJSB + YZJFH is about $2, which is slightly undervalued. The deep discount no longer exist but the prospects are still bright, especially for Financial arm which I am optimistic even with a lack of proper track record. The principal which investments they have carried out in the past is sound. It's a long game and we'll see how much YZJFH is valued in a few days and more importantly see where YZJFH ends up in a few years.

DBS Research values YZJFH at 0.7x P/B while JP Morgan at 0.5x P/B in line with the valuation of Chinese banks. The fair value is therefore $0.77 and $0.54 respectively. Quite far apart.
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The shipbuilding industry is generally not a good industry to invest in, given its inherent cyclicality, high probability of cost overruns, labour intensive nature, high R&D requirements, high capital requirements. Weak earnings and severe overcapacity during the last 10 years prior to the boom in 2021 is a testament to that. Not many survived the downturn - see an insightful video on a tour of China's barren shipyards taken in 2017. https://www.youtube.com/watch?v=D07DvrP9DXo

Yet, there remains a sound investment thesis for purchasing an efficient market leader in such an industry during the trough of the cycle. This is YZJ. 

It should also be borne in mind that majority of the order wins during the boom period of December 2020 - June 2021 comprises of large TEU containerships (>15k), which traditionally have higher margins. We should see a better performance from the shipbuilding component moving forward.

vested.
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It does not bother me too much how much most analysts value companies. The basis usually is purely from a salaried worker whose job is to churn out a specific report within a given short time frame. Not from someone who is considering to invest a significant part of his/her own wealth to own a stake in the business. Such reports usually are very low in depth and quality.

On the other end of the spectrum, private markets funding/ doing valuation for a "disruptor/new fairy tale businiess", the bankers will sell a potato for a trillion dollars for anyone who believes the potato is worth a trillion. That's their job, and that's how Bankers/Wall street work. Welcome to the investment community.

Onto YZJFH, I think a number of people is missing one major point of this exercise of splitting YZJ into 2. YZJFH is incorporated in SG, this is unlike chinese banks, and that's a huge difference. People who somewhat understand doing business in China(case in point, Best world) will realise just how difficult it is to pull this off even with ample resoources and an extended time frame. YZJ being able to pull this off is just another indication of their competence. So I am somewhat confident of this YZJFH spin off even if it does not do well upon listing. Unless management action(s) and results prove otherwise, I am in for the long game for YZJFH.
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(25-04-2022, 11:16 PM)Big Toe Wrote: It does not bother me too much how much most analysts value companies. The basis usually is purely from a salaried worker whose job is to churn out a specific report within a given short time frame. Not from someone who is considering to invest a significant part of his/her own wealth to own a stake in the business. Such reports usually are very low in depth and quality.

On the other end of the spectrum, private markets funding/ doing valuation for a "disruptor/new fairy tale businiess", the bankers will sell a potato for a trillion dollars for anyone who believes the potato is worth a trillion. That's their job, and that's how Bankers/Wall street work. Welcome to the investment community.

Onto YZJFH, I think a number of people is missing one major point of this exercise of splitting YZJ into 2. YZJFH is incorporated in SG, this is unlike chinese banks, and that's a huge difference.  People who somewhat understand doing business in China(case in point, Best world) will realise just how difficult it is to pull this off even with ample resoources and an extended time frame. YZJ being able to pull this off is just another indication of their competence. So I am somewhat confident of this YZJFH spin off even if it does not do well upon listing. Unless management action(s) and results prove otherwise,  I am in for the long game for YZJFH.

With the YZJFH spun off, there is no more buffer for YZJ shipbuilding business. In the past, if the shipbuilding business not in good shape, they can always "massage" the financial report to make it looks good overall.  Big Grin
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In terms of the industry agree with focuspocus that it's deep cyclical. If the cycle goes down YZJ will not be spared. And that is when the FH helped buffer until the Wenzhou blowup and they managed that through as well

Purely on their shipping operational metrics, YZJ continue to be an alpha stock it seems and this spinoff removed that overhang of the FH which had been deem non core except for the ex-chairman's savviness.


(05-08-2016, 11:34 AM)specuvestor Wrote: I think looking at their operating numbers, YZJ has outperformed the sector pretty nicely. It remains an alpha stock in my opinion, but just buying alpha is foolhardy. When the sector turns then it will be time to look at alpha.

Their HTM will continue to haunt them for some time cause the chairman has been "too" savvy. But I wish they can provide more clarity on that front to improve confidence as the persistently high figure may indicate a "rollover".


(29-08-2013, 12:34 PM)specuvestor Wrote: 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.

(02-10-2013, 02:14 PM)specuvestor Wrote: There was significant arb opportunity between offshore and onshore rates 6 years ago. Cost of funding was much lower offshore as people expected RMB to appreciate. That precedes the Chinese property companies raising dim sum bonds.

Unlikely you can see any info on the B/S because those are considered treasury operations, could be just classified as derivatives or hedges. Interesting that u mention the HTM are also 6 years ago. I got to look more in detail to satisfy my own curiosity.

Anyway my point is that the guy is very savvy. I was worried he was spending time doing something non-core and might blow-up. And that's 6 years ago and counting Smile
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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The point of the FH is to buffer the downcycle of shipbuilding. With that portion removed, Shipbuilding will be more volatile for sure. That is another reason why there is a need to spin off NOW, when things are still looking bright for both businesses. With record order book on the shipbuilding side, this is probably the best time.

We have one whole cake. Now split into 2. Under normal circumstances there is no difference and a completely pointless exercise whether it is one or two. BuT in the case of YZJ, the difference is quite significant. Much more so than the capitalland split.
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