Yangzijiang has acquired a 51% interest in Jiangsu Changbo Shipyard Co (JCSC) for Rmb51m and inject another Rmb105m to increase its capital reserves. JCSC is located downstream of Yangtze River, 5km from one of YZJ’s shipyards. JCSC owns shipbuilding facilities with 286k sqm yard space, 926m deepwater coastline and 400k dwt capacity which JCSC owns. In comparison, YZJ has a capacity of 1.95m dwt and Cosco 2.05m dwt.
It currently has a US$338m orderbook comprising 20 vessels, comprising small dry bulkers with deliveries stretching till mid 2012. JCSC has been hampered by high gearing and inefficiencies and YZJ would be able to reap scale economies and operational synergies from this yard. At 0.9x P/B, the cost of investment is also relatively inexpensive. Stock is currently trading at forward P/Es of under 10x.
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