Yangzijiang

Yangzijiang: DMG is neutral on news YZJ landed a US$170 m jackup rig contract with an option for an additional unit and an LOI for an SSP unit, which is a form of FPSO. Says, the rig contract is not a surprise as mgt guided that they are looking to close two jackup orders by the end of the year. While the jackup order should generate some excitement for the stock, the shipyard could experience a steep learning curve as this will be YZJ's first rig project. Moreover, the price of the jackup appears on the low end of recent orders for similar design rigs hence margins may not be attractive. The house notes the unit pricing is significantly below a US$227 m order secured by Lamprell for a similar unit in May. Adds, the LOI's risk lies in execution of the design as the SSP will be the first such unit globally; notes no contract value was disclosed. The house rates the stock Neutral with TP $0.95. Expects YZJ to post -20% FY11-14 EPS CAGR. The stock is down 2.2% at $0.905, from an earlier slight gain at $0.925. .