41 shipbuilding contracts worth USD1.8bn.  Yangzijiang entered into nine new shipbuilding orders in 4Q14, bringing order wins for the year to USD1.8bn,  consisting  of  41  vessels.  These  comprised  two  10,000twenty-foot  equivalent  unit  (TEU)  containerships,  four  36,500 deadweight-tonne  (dwt)  bulk carriers, two 2,700TEU  containerships and one 64,000dwt bulk carrier.  These vessels are expected to  be delivered in  2015-2017.  Additionally,  the  company  granted  four  options  for  two 36,500dwt bulk carriers and two 2,700TEU containerships.

1.8-year  orderbook  on  hand.  2014's  USD1.8bn  close  was  within  the company's  USD1.5bn-2.0bn  target  range,  though  falling  short  of  our USD2.2bn  forecast.  We  calculate  the  current  orderbook,  net  of  4Q14 recognitions, to be c.USD4.5bn, which would cover 1.81  years of FY15F shipbuilding  revenue.  With  a  total  USD4.7bn  of  orders  in  the  last  two years, Yangzijiang's  yards  are relatively  full and we moderate our order win expectations to USD2.0bn going forward.

Positive macro trends. With sales revenues in USD and costs  in CNY, the strengthening  USD  should  benefit  Yangzijiang.  The lower oil prices are a strong positive for global economic growth, which should increase trade  flows  and  demand  for  shipping  services.  As  a  global  leader  in shipbuilding, Yangzijiang stands to benefit from this macro trend.

Maintain BUY with SGD1.68 TP. We continue to like Yangzijiang as the most  efficient  shipyard  in  China,  which  combines  the  lowest  cost structure  with  strict  discipline  on  order  intakes.  Maintain  BUY  with  a SOP-based TP of SGD1.68, which values the shipbuilding business at 8x  FY14F  trough  earnings.  Current  valuations  are  inexpensive  at  c.6x FY15/FY16F P/Es, c.3x EV/EBITDA, with a 4.3% dividend yield. We also highlight that the company is trading near book value, on c.16% ROE.

Source: OSK-DMG