Yangzijiang Shipbuilding - DBS Research 2022-03-01: Investment Spin-Off On Track

Yangzijiang Shipbuilding - Investment Spin-Off On Track

  • Yangzijiang Shipbuilding (SGX:BS6)'s FY21 beat expectations on forex gains and good operational performance; declared S$0.05 final dividend, or 3.6% yield.
  • A prime proxy to shipbuilding and shipping upcycles. After record-high order wins of US$7.4bn in FY21 (48% higher than US$5bn in the last boom in 2007), Yangzijiang Shipbuilding’s yards are full through 2024. While order momentum should slow down, it is expected to stay at an elevated level of ~US$2.5bn per annum. Earnings are set to grow at a 2-year CAGR of 13%, backed by a US$8.5bn record orderbook with gross margin improvement set towards 20% (from 11% in 2H21).
  • Catalysts driving Yangzijiang's share price closer to our target price include:
    1. optimism on the macro economy and shipping market;
    2. sequential earnings growth, underpinned by revenue and margin expansion;
    3. a potential increase in the dividend payout; and
    4. an improving ESG score – comprising a potential spin-off of the investment arm and gaining traction in the dual fuel and LNG carrier markets.
  • Investment spin-off timeline: SGX approval by mid-Mar and completion by early 3Q.
  • The investment spin-off, Yangzijiang Financial Holding (Yangzi Financial), will be led by a separate board of directors to achieve strong governance, transparency, and independence. Upon successful listing, the group will present dividend-in-specie shares of investment listing to existing shareholders on a one-to-one basis. Management aims to deliver value to shareholders with an investment listing valuation above book over the medium term.
  • Our target price for Yangzijiang Shipbuilding has been lifted to S$2.15 after rolling over valuation to FY2022, based on a sum-of-the-parts valuation (SOP), pegged to an 8x P/E on shipbuilding earnings, 0.7x P/BV for investments, and 1.0x P/BV for its marked-down bulk carrier/tanker fleets.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.

Pei Hwa HO DBS Group Research | https://www.dbs.com/insightsdirect/ 2022-03-01
SGX Stock Analyst Report BUY MAINTAIN BUY 1.950 SAME 1.950

Read also DBS Research's most recent report:
2022-03-29 Yangzijiang Shipbuilding - Financial Arms Boosts “E” And “G” Metrics

Target prices by 3 other brokers at Yangzijiang Target Prices.
Listing of broker reports at Yangzijiang Analyst Report.

Relevant links:
Yangzijiang Share Price History,
Yangzijiang Announcements,
Yangzijiang Dividends & Corp Actions,
Yangzijiang News Articles


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