Yangzijiang

[millionairemind]

Ishak - hope it cheong for you tomorrow

Singapore
August 12, 2008, 7.38 pm (Singapore time)
Yangzijiang more than doubles Q2 earnings

China-based shipbuilder Yangzijiang Shipbuilding more than doubled second quarter profits 338.2 million yuan as revenue tripled to 1.77 billion yuan.

First half profit rose to 709.4 million yuan from 329.4 million yuan while revenue soared to 3.47 billion yuan.

Revenue increased due to increased productivity and greater contributions from its latest acquisition of Jiangsu New Yangzi Shipbuilding.

[ishak]

Thanks

Good results still cannot fight the general down trend.

[ishak]

HOLD S$0.63 STI : 2,816.82
Price Target: 12-Month S$ 0.75 (Prev S$ 1.45)
Reason for Report : 2Q8Results
Potential Catalyst: lower steel prices

Margin pressure more apparent
Story: Yangzijiang’s (YZJ) 2Q08 net profit surged 132% y-o-y to RMB338.2m on 249% higher sales as margins disappointed. Gross margin fell 13.5ppt y-o-y and 3.8ppt q-o-q to 17.2%, compared to our expectation of 20%. The negative impact of rising steel prices and rising RMB against the USD has apparently hit YZJ’s gross margin earlier than expected, as it executed on projects that were secured in 2006 at much lower contract prices. As a recap, while we have argued in earlier reports that margins for individual projects commencing April will be hit, the negative impact on group’s margins may only be more apparent in 2H 2008.

Point: YZJ’s gross margins should remain under pressure in 2H08 as both steel prices and the currency continue to be significantly higher versus late 4Q07. Indeed, we expect the prices for new steel plates supply for projects commencing in July 2008 to be about 10% higher than those in 2Q08. But this could be mitigated by: (i) contribution from two high-margins vessels with improved efficiency; (ii) the deployment of larger and highermargin vessels e.g. 92.5k bulkers; and (iii) the execution of better-priced contracts signed in 2007. Still, we cut our gross margin assumption for FY08F and FY09F, and earnings are cut by 6.0% and 10.0% to RMB1409m and RMB1701m respectively.

Relevance: While we believe YZJ is proactive in currency hedging and adopting margin enhancement measures, the execution of its record high order backlog remains a concern. Maintain Hold with a reduced TP of S$0.75, based on a lower PE multiple of 8x (vs 14x previously) on revised FY09F earnings. This is in line with the de-rating of China-listed shipyards, where prices fell recently due to concerns of rising steel prices and currency, as well as
order cancellations.

[millionairemind]

From DBS:-

Maintain Hold and fair value of S$1.45, still pegged to 14x FY09F PE.

So one says 75cts above and one says $1.45... haha... "anal"yst..

[ishak]

From DBS:-

Maintain Hold and fair value of S$1.45, still pegged to 14x FY09F PE.

So one says 75cts above and one says $1.45... haha... "anal"yst..

Maybe that is why the Edge uses the mean target price of various analysts, though personally i feel the average of garbage data is still an average garbage result.

[millionairemind]

Ishak,

That is one of the main reasons I always don't understand how someone can be so sure about FA and do FA alone to determine if a stock is undervalued or over valued..

I do FA.. but I don't use it to gauge a stock's attractiveness or entry solely, kind of combine this with TA...There are alot of stocks on SGX now selling LESS THAN CASH VALUE.. aren't they great bargains??

The value of a stock is the price the last seller is willing to let go at..

Regards,
mm

[ishak]

MM,

I have kind of the same investing style as you. I would refrain from FA/TA discussion else this might become the longest thread.

[ishak]

Yangzijiang 65.5 cents | Neutral

HSBC maintains its “neutral” rating for the shipbuilder and cuts the price target to 65 cents from $1.05, after revising earnings forecasts in the wake of weak first-half results. HSBC cuts FY2008 and FY2009 earnings estimates by 5 per cent and 21 per cent, respectively, due to lower assumed margins for shipbuilding as a result of the higher-than-expected hit from raw material costs in the second quarter.

[millionairemind]

To think this stock used to be traded at $2.80 just last October

The value of a stock is the last price the seller is willing to let go at

DJ MARKET TALK: Credit Suisse Downgrades Yangzijiang To Neutral (2008-08-22 00:38:00)
--------------------------------------------------------------------------------

0038 GMT [Dow Jones] STOCK CALL: Credit Suisse downgrades Yangzijiang (BS6.SG) to Neutral from Outperform, cuts target price to S$0.63 (10X FY09 P/E) from S$1.20 after lowering 2008-2010 earnings forecasts. Cites margin squeeze due to steel costs, stronger CNY, weaker-than-expected revenue growth as reasons for downgrade. Says speed of margin erosion in 2Q08 alarming, noting drop to 14.8% from 19.0% in 1Q08. Stock closed down 1.6% at S$0.605 yesterday. (FKH)

With most analysts set YZJ TP < $0.63, it's unlikely YZJ will go up above $0.63 in near term. Probably not good to short either, bcos co keeps buying back shares, but question is until how long they can pour cash to support its price.

[winston]

Just noticed that YSJ has been buying back alot of their shares..

The last transaction was for 1.9m @ 0.595.

Cummulative shares bought back amounted tp 66.9m representing 20.3% of the maximum.