Friday, October 4, 2013

Yangzijiang Shipbuilding : Moving up the value chain (CIMB)

Yangzijiang Shipbuilding
Current S$1.10
Target S$1.25
Moving up the value chain

 YZJ is competing head-to-head with the Korean shipyards with its maiden capesize bulk carriers (208,000DWT) and large-sized containerships (10,000TEU) in the latest slew of orders worth US$871m.

The 10,000TEU containerships are likely to be options exercised by Seaspan (estimated at US$85m-90m/vessel), while the customer for the four capesize bulk carriers has not been disclosed. YTD order wins reached US$2.1bn, which is in line with our US$2.5bn target. Maintain Outperform with a target price still based on 1.4x CY13 P/BV, 1 s.d. below its 5-year mean. More shipbuilding orders are catalysts.

What Happened
YZJ has secured newbuilding contracts for 17 vessels worth US$871m, comprising four units of 208,000DWT bulk carriers, five units of 82,000DWT bulk carriers, three units of 64,000DWT bulk carriers and five units of 10,000TEU containerships. The delivery of these vessels is scheduled for 2015/16. In 3Q13, YZJ secured a total of 25 shipbuilding contracts worth US$1.085bn with YTD orders reaching US$2.1bn.

YZJ still has 28 options worth US$1.36bn, of which 11 are containerships (US$850m) and 17 are bulk carriers (US$510m).

What We Think
The strong order momentum is a new record since FY08 (US$1.38bn), marking the end of a 5-year drought in shipbuilding for YZJ. We estimate its current order book to be about US$4bn, or 33% higher than 2012. We are hopeful that YZJ will meet our target for 2013 given the options outstanding.

We expect to see more orders dominated by larger vessels – the current capesize orders come with options for two identical units. We believe that YZJ is a beneficiary of the recent BDI rally (2,000) led by the capesize sector.

Seaspan still has options for nine units of 10,000TEU containerships which we believe could be modified into the very large-sized 14,000TEU vessels that are increasingly preferred in the industry.

What You Should Do
Stay invested. We like YZJ as it is one of the last privately-owned Chinese shipyards with decent profitability.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 01/10/13

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