Hot stock: Yangzijiang Shipbuilding up 7% on new China manufacturing base
The base will manufacture clean-energy ships
SHARES of mainboard-listed Yangzijiang Shipbuilding rose as much as 7 per cent during the morning trading session on Tuesday (Jul 16), after the company announced plans to build a clean-energy ship manufacturing base on a piece of land in China it acquired.
As of midday trading on Tuesday, the counter had reached a high of S$2.46, up S$0.16. It was among the top most traded by volume on the Singapore bourse at the time, with 22.9 million shares changing hands.
Yangzijiang’s shares later closed 5.7 per cent or S$0.13 higher at S$2.43, with 33.9 million shares traded.
The heavy trading came after the group announced on Monday that it entered into a framework agreement with the local government of Jingjiang in China’s Jiangsu province to acquire land for the establishment of a new clean-energy ship manufacturing base.
It plans to invest an estimated three billion yuan (S$554.3 million) in capital expenditures over the next two years to complete this project, taking into account the long-term prospects of liquefied natural gas and other clean-energy vessels.
This, however, is subject to the group being satisfied with the outcome of the feasibility study on the project, which is currently being conducted. Implementation is also dependent on approval from various governmental agencies.
CGS International expects the new yard investment to increase the group’s capacity by around 10 per cent, delivering five to six vessels per annum or US$850 million to US$1 billion in orders.
DBS Group Research, meanwhile, is projecting a 20 per cent boost in the shipbuilder’s capacity, which will enable the delivery of an additional six ultra-large or high-value-added vessels.
“This could raise Yangzijiang Shipbuilding’s annual revenue run-rate from US$3.5 billion to US$4 billion to US$4.5 billion, lifting its growth prospects beyond 2026,” said DBS analyst Ho Pei Hwa.
DBS has maintained its “buy” call on the counter but raised its target price by 31 per cent to S$2.75 from S$2.10.
“Yangzijiang’s share price has done spectacularly well post Q1 2024 business update at end May, surpassing our target price,” Ho said, noting that the stock now offers a decent 3 to 4 per cent dividend yield.
CGS International has maintained its “add” call on Yangzijiang and target price of S$2.50.
