OCBC Investment Research on Friday (Apr 22) lowered its fair value estimate for Yangzijiang Shipbuilding : BS6 0% to account for the spin-off of its investment unit.

The research team reduced its estimates for the shipbuilding business to S$0.95 from S$1.75, as the counter has begun trading on an ex-entitlement basis from Friday.

This comes as OCBC expects the net asset value (NAV) per share of Yangzijiang Shipbuilding will fall to about S$0.87 post spin-off. Prior to the spin-off, the NAV per share was around S$1.96.

Shares of Yangzijiang Shipbuilding were trading at S$0.965 at 3.58 pm on Friday, down S$0.575 or 37.3 per cent.

The company had in 2021 proposed to spin off and list its investment unit to focus on asset management and direct investments.

The spin-off will create 2 separate listed companies – one focused on the main shipbuilding business while the other on its investment business – to pursue more targeted business strategies and accelerate growth.

On Wednesday, the company said it would list Yangzijiang Financial Holding on the Singapore Exchange on Apr 28, after shareholders had “overwhelmingly approved” the spin-off.

Meanwhile, Yangzijiang Shipbuilding’s distribution date will take place on Apr 27, and its last trading day on a cum-distribution basis is Apr 21.

While it lowered its fair value, OCBC said it is possible for it to see some rerating for the core shipbuilding business post the spin-off, since this removes an overhang for the stock and leaves a cleaner, shipbuilding-focused entity.

The research team also noted that the shipbuilding arm is seeing a recovery in the industry and its yards are full till FY2024.

As for the investment unit, OCBC expects the market would look at the valuations that Chinese banks are trading at.