SINGAPORE (April 4): CIMB Research is keeping its “add” call on Yangzijiang Shipbuilding with an unchanged target price of $1.21 on the back of new orders.
YZJ in first quarter 2017 added 13 new shipbuilding contracts totalling US$318 million ($444.3 million) to its order book.
These include five units of 62,000DWT woodchip carriers ordered by Pan Ocean Korea, and five units of 82,000DWT bulk carriers ordered by Greece-based Chartworld Shipping.
(See also: Yangzijiang announces contract wins worth $444.3 mil for 1Q17)
“The yard is seeing a more positive enquiry trend from bulk carriers on the back of strong BDI (Baltic Dry Index) in recent months,” says CIMB analyst Lim Siew Khee in a Monday report.
Lim believes that the contract wins in 1Q17 put YZJ on track to meet CIMB’s target of close to US$1.2 billion of new orders in 2017.
Including the new orders, YZJ’s order book currently stands at US$4.6 billion – ranking it top in China’s shipbuilding industry by order book.
“YZJ’s ability to clinch orders versus its peers in Singapore and China should set it apart,” says Lim. “As the industry consolidates, we expect YZJ to dominate the bulk carrier and multi-purpose vessels space.”
In addition, Lim opines that YZJ was able to win orders from Korea – which has its own shipbuilding industry – due to its cost competitiveness and strong track record.
On top of this, Lim believes that order momentum from bulk carriers is expected to improve assuming BDI remains steadfast.
“However, valuation is unjustly punished by investment in assets Held to Maturity (HTM),” says Lim.
Lim notes that YZJ is trading at 0.9x CY17 P/BV. This is at a discount to its peers: Sembcorp Marine is trading at 1.5x CY17 P/BV, while COSCO Corp Singapore is trading at 1.2x CY17 P/BV.
As at 12.09pm, shares of Yangzijiang Shipbuilding are trading 1.5 cents lower at $1.15.
