• 5 S cents DPS declared
• Order book value of US$4.6b
• Targeting US$2b of new order wins

FY13 PATMI down 14%

Yangzijiang Shipbuilding (YZJ) reported a 5% YoY fall in its 4Q13 revenue to RMB3.38b and a 8% decrease in PATMI to RMB746.3m, such that FY13 revenue and PATMI declined by 3% and 14% to RMB14.3b and RMB3.10b, respectively. This was within our expectations, as PATMI came in 2% above our FY13 forecast. Revenue for its shipbuilding related segment slipped 5% to RMB12.8b in FY13, but gross margin rose 3 ppt to 27.4% due to an exceptionally high gross margin of 43.5% in 4Q13. This was boosted by the delivery of higher margin shipbuilding contracts secured before the financial crisis, discounts from its steel suppliers and write-back of provisions upon vessel deliveries. For its investment segment, revenue rose 15% to RMB1.51b. YZJ also declared a first and final dividend of 5 S cents/share, similar to FY12, and translates into a yield of 4.4%.

“Darkness before the dawn”

Management described 2014 as the “darkness before the dawn”, choosing to remain cautious on its outlook this year, but expects to see a rebound in vessel deliveries in 2015. Current order book stands at US$4.6b, comprising 111 vessels. Looking ahead, YZJ is seeking to clinch new order wins of US$2b in 2014 (FY13: US$2.9b). YTD, YZJ has secured eight effective shipbuilding contracts worth a total of US$260m. It also recently signed orders to build two semi-submersible rigs for US$825m, although the contracts will only be made effective upon collection of deposit from its customers. YZJ’s first 10,000 TEU containership underwent its trial voyage in Feb this year, and the success of this trial gives management optimism that its customer Seaspan will exercise its option for the remaining seven units.

Maintain HOLD

We make some minor adjustments to our FY14 PATMI forecast and introduce our FY15 projections. Our fair value estimate inches down marginally from S$1.22 to S$1.21, still pegged to 9x FY14 core earnings. Maintain HOLD.

Source: OCBC Research - 28 Feb 2014