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The Only Shipbuilding Blue Chip in SGX!
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Winnertakeall
Elite |
27-Feb-2023 14:05
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Analysts remain positive on YZJ after lower FY2022 earnings on strong order bookAnalysts are remaining positive on Yangzijiang Shipbuilding (YZJ) BS6 -2.27% after the company reported earnings of RMB2.81 billion ($544.4 million) in the FY2022 ended December 2022, 24% lower than its earnings in FY2021.
CGS-CIMB Research& rsquo s Lim Siew Khee and Izabella Tan have maintained their & ldquo add& rdquo rating for YZJ with a target price (TP) of $1.66, while DBS Group Research analyst Ho Pei Hwa has reiterated her & ldquo buy& rdquo call for YZJ with an unchanged TP of $1.70. The CGS-CIMB analysts note that YZJ& rsquo s 2HFY2022 core net profit of RMB1.44 billion, 30% down y-o-y, was in line at around 53% of their full-year FY2022 forecast, but formed a higher 57% of the Bloomberg consensus forecast. They note that year-to-date (YTD), YZJ has announced order wins of some US$670 million ($904 million), representing around 22% of its order win guidance of US$3 billion for FY2023. We believe the target is achievable. Clarksons showed that YZJ secured two 95,000 Twenty-foot Equivalent Unit (TEU) containerships from Lepta Shipping for an undisclosed amount. Tradewinds also reported that YZJ is contending with Hyundai Heavy Industries for five 15,000 to 16,000 TEU LNG-fuel neo-panamaxes worth some US$900 million Yang Ming Marine Transport,& rdquo say Lim and Tan, while noting that YZJ has not confirmed these new order wins. As YZJ secures 40% progressive payment prior to delivery according to management, including a 10% to 20% upfront deposit at the point of contract signing, the analysts believe the risks of order cancellations are lowered. However, as container freight rates have pulled back significantly since its peak in January 2022, instead of cancellations, we believe a delay in deliveries could be possible. Thus far, YZJ has not had any contract delays negotiations,&rdquo they add. Despite steel costs creeping up, they see the possibility of YZJ&rsquo s FY2023 gross margins rising. They have kept their gross margin forecasts of 17% in FY2023 and 18% in FY2024, as two-thirds of raw materials requirements in FY2023 were procured at lower steel prices and they expect YZJ to execute its higher-priced contracts secured from end-2021 to 2022 in FY2023 to FY2024. The CGS-CIMB analysts&rsquo TP of $1.66 is based on a 2023 price-to-book value ratio (P/BV) of YZJ&rsquo s 30% premium to regional yards&rsquo 1.3x average on a relatively stronger margin track record. This is justified by an FY2023 to FY2024 18% return on equity (ROE) on an order book that stretches till FY2026 with an order replenishment of US$3 billion in the near term, they say. YZJ&rsquo s profit growth of some 19% in FY2023 to FY2024 could also sustain a dividend payout of 36%, which is higher than the 31% average in 2016 to 2021, before the spinoff of YZJ Financial Holdings, which contributed some 40% of its profit during the period. Meanwhile, Ho of DBS says that YZJ&rsquo s FY2022 earnings could have been above expectations if not for provisions made for jack-up rigs, and shows signs of &ldquo compelling&rdquo growth ahead as the prime shipbuilding proxy to the clean energy trend. &ldquo YZJ is the largest and best-managed private shipbuilder in China and has a wide economic moat to compete against Chinese and Korean peers. It has at least a 5 percentage point cost advantage through yard optimisation as well as superior project execution and cost controls,&rdquo says Ho. She adds that YZJ has successfully forayed into the LNG carrier market and targets to improve its corporate ESG. &ldquo YZJ&rsquo s improving corporate governance and pivot towards cleaner vessels such as dual-fuel containerships and gas carriers, which now account for around 40% of its orderbook, could draw more interest from ESG funds,&rdquo notes the analyst. Meanwhile, securing more orders for LNG carriers allows YZJ to scale up and strengthen its market positioning, while the LNG carrier market has high technical barriers to entry and could provide Yangzijiang the next leap of growth, says Ho. She believes the market has yet to fully appreciate the earnings growth potential from YZJ&rsquo s record order backlog. &ldquo YZJ&rsquo s yards are full through 2025 with an orderbook of over US$10 billion. This is expected to propel an earnings CAGR of 20% in the next three years, driven by both revenue growth and margin expansion, as 80% of its orderbook is made up of containership orders that command higher value and margins. We expect further uplift in its orderbook, boosted by potential orders for large LNG carriers,&rdquo says the analyst. Ho&rsquo s TP of $1.70 is based on a 1.7x FY2023 P/BV with a 10.8x implied price-to-earnings ratio (P/E), which she believes is justified by YZJ&rsquo s high 17% ROE and 4% dividend yield. This points to a 28% upside potential on top of a 4% dividend yield. She believes 20% of YZJ&rsquo s re-rating could come from earnings growth and 8% from an uplift in the valuation multiple from 8.4x towards 10.8x P/E, on the back of more LNG carrier orders and ESG improvement. On the other hand, Ho notes that the company&rsquo s revenue is denominated mainly in US dollars. Assuming the net exposure of some 50% is unhedged, every 1% depreciation in the US dollar could lead to a 1.5% decline in earnings, while for every 1% rise in steel cost, which accounts for about 20% of cost of goods sold (COGS), this could also result in a 0.8% drop in earnings. |
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Observers
Elite |
26-Feb-2023 10:00
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Already give divdend in specie YZJFH now worth $0.35, still disappointed ar? Appetite is really 无 底 洞 loh.
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Observers
Elite |
26-Feb-2023 09:29
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No horse run this one. Kudos to the management. | ||||
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john1703
Member |
25-Feb-2023 07:53
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Thanks for the link. I like the fact that the company has very clear direction and is in the position of going only for more profitable deals. Pretty confident with the mgmt tram and hope to hear more good news soon.
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fuzzyshares
Veteran |
24-Feb-2023 18:50
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2/21, 1.31-1.27, closed 1.31, 18m (T-day)
2/22, 1.35-1.30, closed 1.35, 58m 2/23, 1.36-1.32, closed 1.33, 38m 2/24, 1.34-1 31, closed 1.32, 12m Breakdown of trades on T-day: 1.31-4m 1.30-4m 1.29-6m 1.28-4m 1.27-3k After suffering indigestion from the meager meal, today saw low number of passengers leaving the ship. Expect more indigestion? We shall see. |
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Winnertakeall
Elite |
24-Feb-2023 18:35
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ShortSaleVolume from SGX (FYI) 24/2 : 3570000 23/2 : 10003900 22/2 : 20933000 21/2 : 7010100 20/2 : 3873400 17/2 : 4918200 16/2 : 2936900 15/2 : 8327300 14/2 : 8923000 13/2 : 9142300 |
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Winnertakeall
Elite |
24-Feb-2023 13:22
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Today volume very low Look like the FY results and 5c divided not good enough. Total Buy Volume : 2.69M Total Sell Volume: 4.79M |
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fuzzyshares
Veteran |
24-Feb-2023 11:40
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@emailpeter, apparently the rubber duckie is still tied to the propeller. Having said that, let's be mindful that this is a retail stock with many 'short'comings. A high dividend probably would propel the stock but it would also fall like a rock. Long term stakeholders can blame and lament but let's sit back and enjoy the roller coaster ride. | ||||
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pkli899
Supreme |
24-Feb-2023 10:29
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Once again, thank you emailpeter for his very good input. LOL, so we are not alone in feeling they are stingy on rewarding shareholders. Bearing unforeseen circumstances, we can expect further improvement of their performance. At least for this year and next. Hopefully, they also improve on the payout to us. |
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emailpeter
Veteran |
24-Feb-2023 10:06
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https://research.uobkayhian.com/content_download.jsp?id=71911& h=52615a59ed54eaabc4c63d946d02a14a &bull Disappointing dividend. YZJ declared a final dividend of S$0.05 (2021: S$0.045) which was disappointing in our view given that it had S$0.31 in net cash as at end-22. While the company defended the lack of a special dividend by highlighting potential capex for shipyard expansion and/or M& A to cater to higher shipbuilding demand, we note that YZJ has ample headroom to borrow given its net cash position, and especially considering that interest rates in China appear to be trending in the opposite direction to global interest rates. At an early stage of shipbuilding margin expansion. Overall gross margins improved in 2022 as the company secured favourable contract prices and locked in a lower cost of steel used for its shipbuilding segment. YZJ stated that it expects its shipbuilding margins to improve in 2023 and we expect it to stabilise at around 15%. &bull Raising new order outlook to US$3b. Ytd in 2023, the company has clinched new orders totalling 14 vessels with a total contract size of US$0.91b. As a result, YZJ has raised its new order outlook to US$3b for this year, and stated that it will target mostly tankers as its clients are not placing orders for other types of vessels. In addition, the company stated that margins for bulk carriers are lower relative to other vessels and thus will leave the construction of such vessels to its other competitors. Currently, YZJ has a total outstanding orderbook of US$11.03b for 149 vessels. &bull New orders for LNG vessels &ndash being more circumspect. Given that LNG vessels take about three years on average to construct vs two years for other vessels, YZJ revealed on the results call that it is taking a more measured approach since LNG carriers occupy the wharf for a longer period of time it is being more conservative and not chasing after orders in the LNG vessel space. Nevertheless, YZJ expects the market to remain robust given supply-demand gaps due to the Russia-Ukraine war. For its current LNG carrier orders, construction is expected to start in 4Q23 and training of its workers as well and ordering of the necessary equipment are all on schedule. EARNINGS REVISION/RISK &bull Mild upgrades. We have raised our 2023 and 2024 earnings by 2-3% to take into account slightly higher gross profit margins for its shipbuilding segment. Our new gross profit margin estimates of 13.5% and 14.0% for 2023 and 2024 respectively are 50bps higher than previous estimates. VALUATION/RECOMMENDATION &bull Maintain our BUY recommendation with a slightly higher target price of S$1.58 as a result of our EPS upgrades. Our target PE multiple of 9.0x, applied to our 2023 EPS forecast, is 1SD above YZJ&rsquo s past five-year average of 6.7x which we view as fair given the company&rsquo s earnings growth in 2023, as well as the stability of its earnings due to its US$11b orderbook at present. We note that at our fair value of S$1.58, YZJ would trade at a 2023F P/B of 1.3x. |
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emailpeter
Veteran |
24-Feb-2023 09:46
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Investors in SH will need to come in early at lower prices and patiently hold hold hold....... In investing, patience and good foresight is a virtue. I don' t think SH will ever give investors' a decent dividend yield (based on market price). Same with FH (for those who cross hold and read both threads here). Early investors sit on cost of 90c & 45c, so the divs are already premiums, both circa 5.5%. As far as father and son are concerned, small fry investor like me has been satisfactorily rewarded, your white noise ignored by them. They care only about company' s balance sheet (esp cash). Your share price (yes yours, not theirs) is insignificant. Can we share ideas of potential of LNG carriers and terminals here. If SH were to emerge as big player in this. And after the Full EV transport cycle matures or hits major hurdles, the next gen transport might well be green ammonia driven. Do Google maestro Andrew Forrest putting huge weight into Fortescue Hydrogen, huge. Ditto to old school Toyota' s aim. Can we foresee that this will be next boom ? If yes, then the markets will play up SH along with it. Bingo, we might reach 80% if its PER peak value if BB' s fry it up..... Hell, it might even touch Kay Hian' s target price for 2 seconds !!!!!......... hahhaha. Have a great weekend guys ......
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john1703
Member |
24-Feb-2023 09:17
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5c dividend is actually better than I expected given the discontinued FH operation. If FH gives just 1 cent, then it will be record dividend from the YZJ 'group' before pre-spinoff right?
Is there mention of potential LNG order and yard expansion? I thought they mentioned something in Sept business updates and is looking forward to positive progress.
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fuzzyshares
Veteran |
23-Feb-2023 21:13
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2/20, 1.30-1.27, closed 1.28, 14m (T- day)
2/21, 1.31-1.27, closed 1.31, 18m 2/22, 1.35-1.30, closed 1.35, 58m 2/23, 1.36-1.32, closed 1.33, 38m Breakdown of trades on T-day: 1.30-200k 1.29-8m 1.28-6m 1.27-200k After the rush yesterday to board the vessel, today saw some passengers getting off. Passengers were expecting a sumptuous meal but instead were offered a meager meal. With 36m/58m shares trading above 1.34 yesterday, the rush to board could be an inflection point for the stock, be it forward or backward. We shall see. |
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Winnertakeall
Elite |
23-Feb-2023 18:33
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ShortSaleVolume from SGX (FYI) 23/2 : 10003900 22/2 : 20933000 21/2 : 7010100 20/2 : 3873400 17/2 : 4918200 16/2 : 2936900 15/2 : 8327300 14/2 : 8923000 13/2 : 9142300 |
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hokpin
Supreme |
23-Feb-2023 13:40
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Big Bro, I have a same thought like you, at east 5.5 cents. A bit disappointed but good thing is don' t see the price action of dropping a lot.
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pkli899
Supreme |
23-Feb-2023 11:52
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LOL....thanks emailpeter for your very useful view. The Terminals in Jiangsu was already in their control. They just put in another close to S$100 m to buy out the remaining 30%. With the incorporation of an Investment Holding Co (dealing with Realty) in Spore, they probably already have something in mind and will need huge amount of cash in the near future. Maybe that explains why they are not willing to payout more dividend. By the way, I really don' t like the misleading headings in some articles - emphasized on 30% dropped in earning. In actual fact, the results, considering after the split (no more contribution from that business), is remarkable. We must also note that they have already secured contracts of 14 vessels so early in the year. The only worry is cancelling of contracts, now that shipping rates have came down quite a bit. Some State owned yards already received orders cancellation. |
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emailpeter
Veteran |
23-Feb-2023 11:26
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Correction : LNG ships and LNG supply terminals. The green ammonia (hydrogen energy) drive will also play into their hands. They generally know how to find prospects within their core competences, no doubt about that. Just not too sure us long term shareholders get to see some higher benefits of this........ lol... &lsquo 2022 was a remarkable year for Yangzijiang Shipbuilding as we delivered record numbers post the spin-off of our investment segment. Our shipyard has hit new levels of operational efficiency with the yard delivering 71 vessels during the year. In addition, our research and development (R& D) team has expanded our capability to build more sophisticated and greener vessels such as the liquefied natural gas (LNG) carrier, dual fuel vessels with ammonia-ready tanks and methanol dual fuel engines. All of these bode well for our future growth as we keep a firm focus on long-term objectives such as sustainable profitability and growth,&rdquo says Ren Letian, executive chairman and CEO of Yangzijiang Shipbuilding. &ldquo Yangzijiang Shipbuilding is well positioned to progressively convert a sizeable amount of its record-high order book of US$11 billion. As such, we expect to generate healthy cash flow in the coming years, allowing us to generate sustainable returns to our shareholders,&rdquo he adds. (Not too sure many agree with this statement.....lol..
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s100125
Elite |
23-Feb-2023 11:13
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Investment on LPG supply chain terminal will be another lucrative business strategy for YZJ. |
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emailpeter
Veteran |
23-Feb-2023 10:59
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Indeed somewhat dissappointing, reverting to cash hoarding, perhaps he' s devoting it to SG property holdings (maybe an office tower) or that LPG terminal expansion. We await another The Edge interview to get info..... Shipbuilding is highly cyclical industry, we might well be at top of cycle now, no one knows.... So if this is peak dividend, coupled with market shorting/churning, this counter has toughest task getting fair valuation. Hoarded cash and 1 per year low div is a shortist dream..... But then again, I always advocated that they don' t care about their share price, which they only hear from their disgruntled golf partners..... For us long term investors, I allocated at SH 0.90 + FH 0.50 = $1.40 as my base cost right after the split. Those holding for 4+ yrs will know what I mean. Hence my 5c / 90c base at 5.5% is just below pain threshold. But for our past 1 yr invetors, the return is not so good. (and my FH is dismal in performance, for now) Hope to hear more thought and discussion here on their future prospects ..........  
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Joelton
Supreme |
23-Feb-2023 10:14
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Yangzijiang Shipbuilding reports 2HFY2022 earnings of RMB1.44 bil, 30% lower y-o-y
Yangzijiang Shipbuilding (Holdings) BS6 0.00% has reported earnings of RMB1.44 billion ($280.8 million) in the 2HFY2022, 30% lower than the earnings of RMB2.06 billion in the corresponding period the year before.
This brings the group&rsquo s total earnings for the FY2022 to RMB2.81 billion, 24% lower y-o-y.
The drop in earnings for the 2HFY2022 and FY2022 is primarily due to the decline in profit from discontinued operations. The lower share of results of associated companies and joint ventures (JVs) and lower other gains also led to the lower y-o-y earnings.
During the 2HFY2022, revenue for continuing operations increased by 17% y-o-y to RMB11.0 billion due to higher shipbuilding and shipping revenue underpinned by the fully utilised shipbuilding capacity and shipping fleet. This was offset by a dip in revenue for &ldquo others&rdquo .
2HFY2022 gross profit grew by 46% y-o-y to RMB1.77 billion. Gross profit margin increased by three percentage points y-o-y to 16%.
Other interest income fell by 6% y-o-y to RMB200.2 million while others in other income increased by 169% y-o-y to RMB92.3 million.
During the 2HFY2022, the group saw other losses of RMB72.6 million due to forex losses of RMB258 million and partly offset by RMB141 million of fair value gain on derivative financial instruments and RMB44 million of subsidy income. The period&rsquo s other losses were down from the other gains of RMB605.8 million in the 2HFY2021.
In the same period, the group reported a reversal of impairment loss of RMB169.6 million from the impairment loss of RMB397.3 million.
Finance costs increased by 53% y-o-y to RMB106.8 million due to higher bank borrowing costs.
Share of results of associated companies and JVs fell by 77% y-o-y to RMB7.6 million.
Profit before income tax increased by 32% y-o-y to RMB1.83 billion.
Profit from continuing operations increased by 36% y-o-y to RMB1.46 billion. Meanwhile, there was no profit from discontinued operations in the 2HFY2022, down from the RMB973.1 million in the 2HFY2021.
Revenue for continuing operations during the FY2022 increased by 37% y-o-y to RMB20.71 billion due to higher revenue from its shipbuilding and shipping segments and offset by the lower revenue from &ldquo others&rdquo .
FY2022 gross profit grew by 46% y-o-y to RMB1.77 billion.
Gross profit increased by 53% y-o-y to RMB3.2 billion. Gross profit margin increased by one percentage point to 15%.
Other gains during the FY2022 fell by 76% y-o-y to RMB233.1 million.
During the FY2022 the group reported a reversal of impairment loss of RMB78.9 million from the impairment loss of RMB358.4 million.
Share of results of associated companies and JVs fell by 86% y-o-y to RMB13.1 million.
Profit before income tax increased by 26% y-o-y to RMB3.30 billion.
Profit from continuing operations increased by 31% y-o-y to RMB2.62 billion while profit from discontinued operations fell by 89% y-o-y to RMB194.6 million.
As at Dec 31, 2022, cash and cash equivalents stood at RMB10.78 billion.
A final dividend of 5 cents per share has been declared for the period, representing a 36% payout based on the group&rsquo s fully diluted earnings per share (EPS) of 71.25 RMB cents for the FY2022.
The final dividend is also unchanged from FY2021&rsquo s final dividend.
Since the group&rsquo s last announcement in November 2022, it has secured four more units of vessels in 2022 and 14 more units of vessels in 2023. This brings its total outstanding orderbook of US$11.03 billion ($14.79 billion) for 149 vessels, extending its revenue visibility to the end of 2025.
The group adds that its order-win strategies have steadily shifted to alternative fuelled vessels and dual fuel vessels with 27% of its outstanding orderbook classified as eco-friendly vessels as at Dec 31, 2022, up from the 15% in the year before.
In FY2022, the group built a total of 71 vessels which exceeded its full year target of 70 vessels, of which 67 units were delivered to customers and 4 units were added into the group&rsquo s own fleet.
Looking ahead, the group believes that the shipping industry is expected to see a potential turnaround on the back of China&rsquo s reopening. Demand for shipping is expected to improve in 2023 boosted by the seasonal cycles after the Chinese New Year period and lower spot rates compared to forward shipping rates.
&lsquo 2022 was a remarkable year for Yangzijiang Shipbuilding as we delivered record numbers post the spin-off of our investment segment. Our shipyard has hit new levels of operational efficiency with the yard delivering 71 vessels during the year. In addition, our research and development (R& D) team has expanded our capability to build more sophisticated and greener vessels such as the liquefied natural gas (LNG) carrier, dual fuel vessels with ammonia-ready tanks and methanol dual fuel engines. All of these bode well for our future growth as we keep a firm focus on long-term objectives such as sustainable profitability and growth,&rdquo says Ren Letian, executive chairman and CEO of Yangzijiang Shipbuilding.
&ldquo Yangzijiang Shipbuilding is well positioned to progressively convert a sizeable amount of its record-high order book of US$11 billion. As such, we expect to generate healthy cash flow in the coming years, allowing us to generate sustainable returns to our shareholders,&rdquo he adds.
Acquisition
In a separate announcement, Yangzijiang says it has acquired the entire issued share capital of Jiangsu Jiasheng Gas Co., Ltd (Jiasheng Gas) for RMB430.1 million. The acquisition was made through the group' s wholly-owned subsidiary Jiangsu Yangzijiang Shipbuilding Co Ltd.
Upon the completion of the acquisition, the group will own an indirect 100% equity interest in Jiangsu Yangzi Jiasheng Terminal Co., Ltd (formerly Odfjell Terminals (Jiangyin) Co., Ltd.) through Jiasheng Gas.
In its statement, the group says it intends to convert Jiangsu Yangzi Jiasheng Terminal' s petrochemical terminal site and adjacent land in the upstream Yangtze River region to an LNG terminal facility once it has obtained approval from the government.
The group also intends to build LNG filling and storage facilities on the land site adjacent to Jiangsu Yangzi Jiasheng Terminal, which Jiasheng Gas also owns. Together with the terminal service, the group aims to build up an integrated LNG supply chain including complete terminal service, LNG filling, storage and distribution in the upstream Yangtze River region, which will serve as a LNG logistics hub.
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