Yangzijiang Shipbuilding (YZJ) recently announced that one of its subsidiaries had subscribed for 30% equity interest in Jiangsu Nantong Yanhai Emerging Industrial Investment Fund with an authorized share capital of up to RMB300m, thereby making Nantong Yanhai an associate.

The operating term of the fund is seven years, and its core business is related to industrial investment, venture investment and equity investment in small and medium sized privately-owned enterprises in emerging industries such as new materials, energy conservation and environmental protection, advanced manufacturing technology, health care and innovative consumption business.

In Jan this year, a unit of YZJ also subscribed for a 32.8% equity interest in Wuxi Jinrui Zhonghe Investment Enterprise for RMB196.8m.

The core business of Jinrui Zhonghe is related to investment holding with a paid up capital of up to RMB600m, and the move was meant to enhance management's expertise in cash redeployment.

Based on these recent moves, YZJ still seems intent on parking money in investment funds, something it ventured into years ago. Maintain HOLD with S$0.96 fair value estimate.

Source: OCBC Research - 28 Mar 2017