Yangzijiang Shipbuilding (Holdings)

[Ray168]

Just thinking, since the foundamental is good, one should consider to accumulate more when the price is depressed due to external factor.

Vested.

[CityFarmer]

Spend some time on this company, and found that probably worth a further look ...

Base on the latest FY report's segmented data

Shipbuilding segment margin improved, and staying around 24% which is a good sign with current marine sector market condition.

Investment segment improved, with ROA improved to 7-8%, which is also a good sign.

There is Others segment, which i am yet to find out more detail. This segment still a small segment which is losing money.

Dividend reduces from 5.5 cents to 5.0 cents. IIRC, this is the 1st time the company reduces it dividend.

Marine sector is still struggling, especially those operating in China. Will YZJ a better option to bet on turn-around of marine sector, if it ever happen?

Nick and the rest, any comment?

[Nick]

If I am not mistaken, the revenue from the shipbuilding division from FY 2009 - FY 2012 reflects a large portion of the high margin pre-crisis ship building contract. Most of these contracts have been fulfilled leaving the low margin post GFC (shipping recession) contract. Considering the low freight rates and vessel over-supply, I don't think we will see a boom in dry bulk and container vessel new orders. The shipyards around the world are hungry for orders so the margins will be depressed. In YZJ case, recently Seaspan exercised the option for 4 additional 10,000 TEU vessels in Jan 2013 for US$90 million each (the unit price of the same vessel contract was US$100 million in June 2011). This division is likely to report weaker margins going forward. I believe this is why the Management is diversifying into investments (I think pawn shop model), microfinancing, property development, ship breaking and offshore building. Ship breaking is counter-cyclical so it could be a positive surprise. I suspect Keppel Corp is who they are trying emulate.

(Not Vested)

[CityFarmer]

If I am not mistaken, the revenue from the shipbuilding division from FY 2009 - FY 2012 reflects a large portion of the high margin pre-crisis ship building contract. Most of these contracts have been fulfilled leaving the low margin post GFC (shipping recession) contract. Considering the low freight rates and vessel over-supply, I don't think we will see a boom in dry bulk and container vessel new orders. The shipyards around the world are hungry for orders so the margins will be depressed. In YZJ case, recently Seaspan exercised the option for 4 additional 10,000 TEU vessels in Jan 2013 for US$90 million each (the unit price of the same vessel contract was US$100 million in June 2011). This division is likely to report weaker margins going forward. I believe this is why the Management is diversifying into investments (I think pawn shop model), microfinancing, property development, ship breaking and offshore building. Ship breaking is counter-cyclical so it could be a positive surprise. I suspect Keppel Corp is who they are trying emulate.

(Not Vested)

This is the message i extracted from postings in this thread, especially from your posting.

So going forward, shipbuilding margin will be compressed by ship owners. The current share price is reflecting this trend. It will take several years for the market to improve its profitability IMO.

hmm... research continue...

Thanks Nick

[CityFarmer]

Update after further research on YZJ

The Other Segment likely contains the following
- Offshore Jack-up Drilling Rig business
- Energy equipment manufacturing business in Jiangsu Zhuoran Yangzijiang Energy Equipment Co. Ltd
- Property business in Jiangsu Huaxi Yangzi Real Estate Co. Ltd

The order book in FY2012 has only 64 vessels with value US$3.4 Billion, which is about 1-2 years buffer.

Reducing margin and reducing revenue due to lower order in the next 1-2 years is pretty certain. YZJ core business is definitely not at a turning point, at least not yet.

YZJ is trading with PE 5, PB 1.2, versus the industrial average of PE 15, PB 1.0

Is YZJ traded at fair value or under-value now? Hmm....

[CityFarmer]

The market will continue in down trend..., similar for YZJ

Global container ship capacity to ‘outpace demand’

SINGAPORE — Maersk Line, the world’s biggest container ship operator by volume, expects container ship capacity to grow 11 per cent this year, outpacing demand.

The industry is likely to scrap more vessels, sail them at even slower speeds and idle more ships in order to balance supply with growth, said Maersk Line Chief Executive Soren Skou.

http://www.todayonline.com/business/glob...ace-demand

[FatBoi]

Downtrend it may be, so it could be a matter of matching horizons between holding period and pointt of upswing in industry fortunes. A test of holding power. It helps YZJ pays shareholders (dividends) while we wait.

Another recent article by RS Platou suggests consolidation of shipyards could be on the cards. We shall see if YZJ management is well positioned for these opportunities when they arise. A bit on hope which is not my preferred investing strategy, unfortunately near term numbers from operations should remain muted at best.

http://www.shippingherald.com/Admin/Arti...-High.aspx

[peterlynch]

Yzj is a very well managed company in a very lousy industry. I am selling all my Yzj shares. Thanks for the ride, Mr ren

[CityFarmer]

Downtrend it may be, so it could be a matter of matching horizons between holding period and pointt of upswing in industry fortunes. A test of holding power. It helps YZJ pays shareholders (dividends) while we wait.

Another recent article by RS Platou suggests consolidation of shipyards could be on the cards. We shall see if YZJ management is well positioned for these opportunities when they arise. A bit on hope which is not my preferred investing strategy, unfortunately near term numbers from operations should remain muted at best.

http://www.shippingherald.com/Admin/Arti...-High.aspx

Thanks for the sharing.

Shipyards consolidation already started, most orders go to leading shipyard e.g. YZJ in China, pushing smaller shipyards out of business. The push factors are
- Ship owners prefer shipyard with strong financial backing, which can survive with new progressing payment scheme, which larger part of payment quantum at the end of work cycle. Ship owners need a stronger partners during this difficult time
- China government supports strongly on shipyard industrial with stimulus packages, but only on leading shipyards with good order e.g. YZJ. This provides strong financial support to leading shipyards, and leaving smaller one out.

With less competitors, and will YZJ do better when up time arrives? Hmm...

[peterlynch]

Yzj is the best shipbuilder in Asia now. When the industry recovers, it will rebound. The question is when?