Hot stock: Yangzijiang shares galvanised by decent results

Anita Gabriel
Published Thu, Mar 2, 2017 · 07:15 AM
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SHARES of Yangzijiang Shipbuilding Holdings jumped five Singapore cents or 5.1 per cent to S$1.035 as at 2.38 pm, a day after China's largest shipbuilder reported a decent pair of results for the quarter as well as full year.

The counter was the seventh most active around midday, with 30 million shares worth S$32 million done.

It earlier hit an intraday high of 1.04 Singapore cents.

Yangzijiang posted a big jump in fourth-quarter net profit to 607.8 million yuan (S$124.5 million) from 41.5 million yuan a year ago led by a leap in other income due to recognition of advance payment from terminated shipbuilding contracts and lower expenses.

This was achieved on the back of a 76 per cent rise in revenue to 5.5 billion yuan.

For the full year, it turned in a profit of 1.75 billion yuan - down 29 per cent from a year ago - against a 6 per cent drop in revenue to 15 billion yuan.

"Commendable results," said OCBC Investment Research, also referring to its gross profit margin of 24.1 per cent in FY2016 versus 23.2 per cent in 2015.

The research house has increased its price earnings multiples for the shipyard from seven to eight times with a "hold" rating despite the weak macro outlook as the group has "consistently demonstrated superior execution ability and healthy margins".

DBS Group Research was more sanguine, raising its target price to S$1.12 and reiterating a "buy" call.

The company's biggest plus points, according to DBS, is that as the largest and most cost-efficient private shipbuilder in China, it is well placed to benefit from the state-owned enterprise (SOE) reform in China and ride the anticipated shipping recovery.

Furthermore, the firm has a "solid balance sheet", a tide that is turning in its favour as the global orderbook-to-fleet ratio for the sector has dropped to a low of 11 per cent and a healthy order backlog, said DBS.

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