• Yangzijiang announced US$1.3bn of contracts for 29 vessels, including 22 containerships. Meanwhile, freight rates are firm.
• The key positive is its win from a Chinese domestic liner, Shanghai Zhonggu Logistics, of 10 units of containerships (4,600TEU).
• Reiterate ADD on Yangzijiang and target price of S$1.37, based on SOP valuations. The stock is cheap, trading at trough of ~0.5x P/BV and 6x FY21F P/E.
• Yangzijiang Shipbuilding (SGX:BS6) is one of our SG high-conviction picks (see report: Navigating Singapore - CGS-CIMB Research 2020-12-09: Injection & Hope).

US$1.3bn of Contracts, Making Inroads With Chinese

• We are positive on the fact that Yangzijiang is making firm inroads with Chinese companies and competing head-on with state-owned yards. Some of the key wins since 2020 have been with major Chinese companies, including SITC, Zhejiang Seasport Shipping, Shanghai Ganglu Shipping and Shanghai Baosteel.
• Other containership orders disclosed in this announcement are 4 orders of its ultra-large, 24,000TEU containerships as well as 8 units of 1,800TEU containerships.
• Yangzijiang also has orders for some bulk carriers, which include an 82,300DWT bulk carrier, 4 units of 66,000DWT bulk carriers and 2 units of 31,800DWT great lake bulk carriers.

Strong Order Momentum; Yangzijiang's Order Book at ~US$3.7bn-3.9bn

• With the above wins, we estimate Yangzijiang’s order book to be at about US$3.7bn-3.9bn. Yangzijiang last reported a US$2.6bn orderbook in early-November. Since then, it won another ~US$730m of contracts in Nov-Dec and closed 2020 with ~US$1.8bn of new orders, enhancing its earnings visibility for the next two years.
• We have factored in US$1.8bn of new orders for FY21F for now.

Reiterate ADD and Target Price of S$1.37; 4Q20F Could See Forex Loss

• Yangzijiang's strong net cash of RMB4.4bn (S$0.22 per share) at end-Sep 20 should allow it to sustain its above-market yield of 4.3%. Yangzijiang's share price is trading at a new trough and undemanding valuation of 5.6x CY21F P/E and 0.5x CY20F P/BV vs ROE of 9%.
• Our SOP valuations peg its assets held to maturity at 1x FY20F P/BV, in line with its ROE of ~11%, and its shipbuilding business at 0.7x CY20F P/BV, -1 s.d. from its 6- year average.
• 4Q20F Preview: We estimate net profit was RMB1bn but see earnings downside if Yangzijiang records high forex loss as RMB dipped ~4% q-o-q. Recall that Yangzijiang recorded a RMB367m forex loss in 3Q20.
• We reiterate our ADD call as Yangzijiang is a proxy for strong freight rates. The Shanghai Containerized Freight Index (SCFI) Comprehensive Index rose further to 2,884 as of 5 Feb (+216% y-o-y). A new wave of COVID-19 infections in China is a key downside risk.

Source: CGS-CIMB Research - 9 Feb 2021