The Share Price of This Singapore Blue-Chip Stock is Up More Than 50% Year-to-Date: Can it Continue to Soar?

In June 2023, the group secured its first order win for methanol dual-fuel containerships.

The contract, signed with shipping giant Maersk, involves the construction of six 9,000 TEU methanol dual-fuel containerships to be delivered between 2026 and 2027.

Green methanol is reported to reduce nitrogen oxide by around 45% and sulphur oxide by around 8% compared with conventional fuels.

Another six units of such containerships were secured in January this year for Ocean Network Express Pte Ltd to be delivered from 2027 onwards.

Catalysts for further growth

Management sees healthy demand for oil tankers and gas carriers that should fuel the group&rsquo s continued growth.

The containership market should see growth of 9.5% this year as shipping companies undertake fleet renewal.

LNG carriers should also see a compound annual growth rate (CAGR) of 3.6% by 2029, driven by the global energy transition to cleaner fuels along with major industrial coal-to-gas switching in China.

Crude oil tankers should also grow at a CAGR of 2.5% ill 2029 with catalysts being fleet renewal and longer sailing distances caused by geopolitical disruptions to shipping routes.

Finally, the liquefied petroleum gas (LPG) carrier market is projected to grow by 5.5% CAGR by 2029 boosted by strong growth in shale gas production coupled with rising demand for LPG for heating and ventilation.

The numerous catalysts outlined above should stand YZJ in good stead to continue clinching contracts and building its order book.

Get Smart: Cyclicality is a risk

While the catalysts above point to better times ahead for YZJ, investors should note that the shipping industry is inherently cyclical.

Companies are ordering new ships now because of fleet renewal and strong demand that exceeds supply.

With new ships delivered, there is a risk that the cycle could turn and that supply will exceed demand.

Should this happen, ship values will decline and shipowners may default, thus affecting YZJ&rsquo s order-clinching ability and the collectability of debts.

A major economic or geopolitical event may also depress demand and result in shipping companies delaying new builds, thus posing another risk to YZJ.

Barring the above risks, prospects look bright for the group to continue growing its order book.