Yangzijiang Shipbuilding - DBS Research 2022-09-09: GTT Accreditation A Tipping Point; All Set For LNG Carrier Orders

Yangzijiang Shipbuilding - GTT Accreditation A Tipping Point; All Set For LNG Carrier Orders


Probably the most important breakthrough that paves the way for Yangzijiang's entry into LNG carrier market

  • Yangzijiang Shipbuilding (SGX:BS6) has obtained the GTT license for the construction of vessels using industry benchmark GTT Mark III membrane technology. This showcases Yangzijiang’s technical capability to build large LNG carriers. The space is currently dominated by Korean shipbuilders, who have 80-90% of market share.
  • GTT is the global market leader in containment system technology for LNG carriers, controlling over 70% of the market based on the current global LNG fleet – including Liquefied Natural Gas Carriers (LNGC); floating LNG production, storage, and offloading (FLNG); and floating storage and regasification units (FSRU).
  • There are 3 main alternative technologies:
    1. Moss Maritime technology, developed by a subsidiary of Eni- Saipem;
    2. SPB technology, developed by a Japanese engineering and shipbuilding group, and
    3. KC-1 technology, developed by Kogas in South Korea.

Yangzijiang Shipbuilding is the first non-SOE Chinese shipyard to obtain GTT license.

  • Including Yangzijiang, there are 29 GTT licensed shipyards globally, for both commercial vessels and offshore platforms. In China, there are 8 GTT licensed yards. Of this, Hudong Zhonghua is the most prominent Chinese LNG carrier builder with 30 units or ~11% market share, while the Jiangnan Shipyard and Dalian shipyards have five and two units of large LNG carriers in its orderbooks, respectively.
  • Yangzijiang would be the first non-SOE Chinese shipyard to be added to the GTT licensed yard list. Based on Clarksons, the latest LNG carrier orders are slated for delivery in 2026.
  • We believe Yangzijiang is well positioned to secure its maiden LNG carrier order with this GTT accreditation and their earlier delivery slots in 2025. LNG carrier is one of the highest value commercial vessels with highest barrier to entry. A 170- 180cbm LNG carrier newbuild unit would cost ~US$250m. This will not only be the next growth driver for Yangzijiang but also a critical development in its clean vessel transformation, riding on robust demand for LNG carriers and trend towards cleaner LNG dual-fuel vessels.

Mediterranean Shipping's orders worth > US$2.16bn in the bag?

  • TradeWinds reported that Mediterranean Shipping Co (MSC) has struck a deal with Yangzijiang to build a dozen 16,000 TEU LNG dual-fuel containerships worth at least US$2.16bn. Assuming this includes options, 6 firm orders would imply a value of almost US$1.1bn, which is still very sizeable.

Yangzijiang is beneficiary of strengthening US$.

  • Yangzijiang benefits from the US$ appreciation, as revenue is predominantly in US$, while reporting is done in RMB. 30% of the cost is naturally hedged through the procurement of main equipment and material in US$. Yangzijiang has prudently entered into forward contracts to hedge 40%-50% of its US$ exposure at RMB6.7-6.9/US$ to manage forex volatility. Hence, the remaining exposure or ~30% of revenue would be subject to forex fluctuations.
  • We estimate that for an appreciation of every 10 RMB cents against the US$, Yangzijiang’s net profit would be lifted ~1.5%-2.0%.

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/ 2022-09-09
SGX Stock Analyst Report BUY MAINTAIN BUY 1.400 SAME 1.400

Previous report by DBS Research:
2022-08-10 Yangzijiang Shipbuilding - Stronger Earnings Ahead And Still Cheap

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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