Yangzijiang Shipbuilding (Holdings)

[propertyinvestor]

I rather YZJ focus on their high margin money lending business. If they could grow it to a similar size like Hong Leong Finance, there is the juicy option of spinning it off one day like what Keppel did for K Green Trust.

[Greenrookie]

http://www.hellenicshippingnews.com/News...8692f9dff1

FYI only,

Ren YUan Lin view on the shipping sector, although he had said it had bottomed, his view is it will stay bad for the next 5 years. Wow, if you continue giving generous dividends, I will stay put, given the order book, YZJ should be able to slug along the next 3 years without any bleeding.

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Insiders all seem to have a dim view regarding an immediate recovery of the shipbuilding industry.
"For shipbuilders, 2011 was gray, 2012 is black, and 2013 will be bloody," said Ren Yuanlin, the chairman of the Yangzijiang Shipbuilding Group Ltd.
Ren added that he expects the bearish conditions to persist for at least five years.

－－－－
scary... his view is more pessimistic than greengiraffe's 7 bear years and 3 bull years, he is predicting at least a decade of bear, since this is already the fifth year into the downturn.

[freedom]

if you look at the current price of various ships, there is not going to be any "super" profit in the near future(the 5 years Ren mentioned?).

Take a look at the margin of contracts pre-crisis and recent contracts. Recent 10K TEU container ships maybe can generate 10% operating margin, but it is nowhere near the margin of pre-crisis of more than 20%.

[Greenrookie]

if you look at the current price of various ships, there is not going to be any "super" profit in the near future(the 5 years Ren mentioned?).

Take a look at the margin of contracts pre-crisis and recent contracts. Recent 10K TEU container ships maybe can generate 10% operating margin, but it is nowhere near the margin of pre-crisis of more than 20%.

hmm freedom,

How did you derived the cost of construction of the 10K Teu ships? since it is the first to be built by them, and the costs of steel, parts are so many to be tracked?

Or it is an big overall picture of margin in the good years and recent years?

given steel price has been falling and at a low from the past 2 years, maybe the cost has improved?

Need the quarter reports to check, but YZJ has managed to maintain decent margins so far, and subsequent quarters will the ones that are ordered at the off peak years

[freedom]

if you look at the current price of various ships, there is not going to be any "super" profit in the near future(the 5 years Ren mentioned?).

Take a look at the margin of contracts pre-crisis and recent contracts. Recent 10K TEU container ships maybe can generate 10% operating margin, but it is nowhere near the margin of pre-crisis of more than 20%.

hmm freedom,

How did you derived the cost of construction of the 10K Teu ships? since it is the first to be built by them, and the costs of steel, parts are so many to be tracked?

Or it is an big overall picture of margin in the good years and recent years?

given steel price has been falling and at a low from the past 2 years, maybe the cost has improved?

Need the quarter reports to check, but YZJ has managed to maintain decent margins so far, and subsequent quarters will the ones that are ordered at the off peak years

my comment above is just a general opinion only.

the 10% margin is my own estimate only.

the current good margin is mainly because the revenue recognizing now is still from pre-crisis.

[CityFarmer]

A relevant news report...

China issues plan to overhaul troubled shipbuilding industry

BEIJING — China’s State Council has issued a three-year plan to upgrade and restructure its troubled shipbuilding industry through 2015, a further move to stabilise economic growth through reform, the official Xinhua news agency reported yesterday.

The sector faces “unprecedented, severe challenges” as a lack of new orders — due to weakness in the global shipping market — has exacerbated overcapacity in the industry, the news agency said, citing a government document. Concurrently, companies should be confident as “the potential in the domestic market remains relatively large”.

China, the world’s biggest shipbuilding nation, may see a third of its more than 1,600 shipyards shut down in about five years, according to Mr Wang Jinlian, head of the industry association. The sector is among those, including iron and steel, cement, electrolytic aluminium and flat glass, that must accelerate the phasing-out of overcapacity, according to a July 24 statement from the Ministry of Industry and Information Technology.

http://www.todayonline.com/business/chin...g-industry

[Greenrookie]

Dual currency trading is a waste of time...

Same for HPH, same for YZJ, in the end, there will be no arbitrary opportunity, the lower volume counter will simply take cue from the leader. And the lower volume counter has pathetically low volume.

They share allow blue chips that are above $5 to trade in smaller lots size.

[FatBoi]

An article from Wall Street Journal Asia (below).

---start of article----
Singapore Oil-Rig Makers Play Defense
By Eric Yep
6 Aug 2013
The Wall Street Journal Asia

Despite booming demand, tiny Singapore faces a tough time ahead defending one of its few heavy industries, building offshore drilling rigs.

The reason is familiar: rising Chinese competition.

Singapore's rig makers, Keppel Corp.'s Keppel Offshore and Marine unit and SembCorp Marine Ltd., which both posted lower second-quarter profits, are responding by trying to move upmarket, with equipment that can drill for oil and gas at greater depths and more extreme conditions than the shallow-water rigs they've specialized in. But this is a sector where South Korean yards are well-established and China is a growing presence.

Asian shipyards, mostly from these three countries, control about 75% of the market for offshore drilling equipment, and until two years back Keppel and SembCorp Marine were the top suppliers of jack-up rigs -- platforms built onto the seabed in relatively shallow water. They typically cost about US$200 million. But in 2012 they won only nine new orders for jack-ups between them, while Chinese yards, which include Dalian Shipbuilding Industry Offshore Co., CIMC-Raffles and China Ocean Shipping (Group) Co., won 14. For the first seven months of 2013, China leads, 23-17. Singapore makers still have long order books -- but cheaper Chinese rigs means getting new business will be tough.

Marine and offshore engineering accounted for 6.4% of Singapore's total manufacturing output in last year, bringing in about 19 billion Singapore dollars (US$15 billion), trade ministry data show.

Chinese yards are on track in 2013 to win the largest number of rig orders they've had in any single year, helped by a sustained drive to redeploy resources from the glutted shipbuilding sector. Beijing's five-year economic-development plan, which runs through 2015, calls for developing three coastal hubs for offshore equipment: Bohai Bay, the Yangtze River Delta and the Pearl River Delta.

China's goals for the five-year period: sales of 200 billion yuan ($32.3 billion) and 20% of the global market for offshore products like rigs and platforms. To achieve this -- and to gain technological know-how -- Chinese yards are willing to undercut competitors and sacrifice profit, said Vincent Fernando, director of Asean Research at Religare Capital Markets.

On Thursday, SembCorp Marine said its second-quarter net profit was down 13% from a year earlier. It said it expects strong rig demand but heavy competition, and is betting on state-of-the-art facilities at a new yard due to open this month.

Last month, Keppel Corp. said its second-quarter net profit was off 33%. It said mounting Korean and Chinese competition continues to suppress prices and margins, though it also noted a healthy order book: S$13.1 billion as of June.

Demand for higher-end rigs is being driven by sustained high oil prices, which support development of reserves that are costlier to extract, and enhanced safety needs since BP's Gulf of Mexico spill in 2010, said Keppel Chief Operating Officer Chow Yew Yuen. Keppel will continue to improve in areas where it has good leverage to compete, he said, citing three: technological prowess, its ability to meet delivery schedules and its ability to provide customized rigs.

Last month, Keppel announced a new drillship design it plans to introduce in 2014. Drillships, used in water up to three kilometers deep, cost four times as much as jack-ups.

---- end of article -----

Broadly speaking from reading of recent articles,
Singapore players recognise and feels the competition from the Chinese (& Korean) yards.
Chinese yards struggle still and will be in consolidation mode in the short term.
LNG is the big trend, and if Asia demand for LNG is to be met by US / Australia, demand for LNG ships should increase.

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http://reaching4financialfreedom.blogspot.sg/

[FatBoi]

A relevant news report...

China issues plan to overhaul troubled shipbuilding industry

BEIJING — China’s State Council has issued a three-year plan to upgrade and restructure its troubled shipbuilding industry through 2015, a further move to stabilise economic growth through reform, the official Xinhua news agency reported yesterday.

The sector faces “unprecedented, severe challenges” as a lack of new orders — due to weakness in the global shipping market — has exacerbated overcapacity in the industry, the news agency said, citing a government document. Concurrently, companies should be confident as “the potential in the domestic market remains relatively large”.

China, the world’s biggest shipbuilding nation, may see a third of its more than 1,600 shipyards shut down in about five years, according to Mr Wang Jinlian, head of the industry association. The sector is among those, including iron and steel, cement, electrolytic aluminium and flat glass, that must accelerate the phasing-out of overcapacity, according to a July 24 statement from the Ministry of Industry and Information Technology.

http://www.todayonline.com/business/chin...g-industry

Further related news - http://africa.chinadaily.com.cn/business...874218.htm

Quote: "The new three-year plan has three measures. One is to expand domestic demand and promote export. One is to drive technology innovation. Last is to accelerate the layout and the structure adjustment of the shipbuilding capacity." Cao Yousheng, Deputy Director of Tech. Research and Eco. Dev. of CSSC said.

Specific actions for the 3 measures underlying the 3-year plans
(1) To expand domestic demand, the plan is to encourage the scrapping of older ships and more military-civilian cooperation in vessel design and development.

(2) To maintain a more stabilized international environment, the plan encourages financial institutions to increase credit support for foreign buyers of vessels and equipment, and study securitization of shipbuilders' loans.

Besides restricting new shipbuilding capacity, the government is encouraging mergers and acquisitions and the pooling of resources in the industry.

(3) The plan also encourages the development of offshore engineering equipment such as drilling platforms and large LNG ships.

My view: Industry is getting a lot of govt support and while it is down, it is certainly not out. Players with strong balance sheets will prevail.

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http://reaching4financialfreedom.blogspot.sg/

[CityFarmer]

The company half year report is announced.

Yangzijiang remains profitable amid industry turmoil, reports RMB811.7 million in earnings for 2Q2013
 Group revenue increased 12% in 2Q2013 mainly due to higher revenue recognition from construction of larger vessels
 Healthy gross profit margin of 27%; core shipbuilding margin remains strong at 21%
 Strong order book momentum despite weak shipbuilding industry, US$1.0 billion worth of newbuild contracts secured in 1H2013
 Outstanding order book comprised of 71 vessels worth US$3.24 billion

http://infopub.sgx.com/FileOpen/Announce...eID=251254