Yangzijiang

Yangzijiang: FY12 earnings in-line with Street expectations; Revenues declined 6% y/y to Rmb14.8b; earnings declined 10% to Rmb3.6b. Sales missed Street expectations by 5% however, due to lower vessel delivery which resulted from the cessation of shipbuilding contracts. Revenue contribution from Investment segment increased 20% y/y to Rmb1.3b in FY2012 as compared to Rmb1.1b in FY2011, due mainly to higher loans to third parties in the Micro Finance business. However, in spite of the challenging environment in the shipbuilding industry, the Group maintained gross profit margins at 31%. PATMI came down to 24% for FY12, vs 25% for FY11, due to the increase in Admin & Finance expenses. The industry downturn may have a prolonged impact that stretches beyond 2013. Progress in Shipbuilding and related segments may be slow moving ahead, but steady investments in held-to-maturity assets will provide the Group comfortable cushion against the industry downturn. The Group will maintain the steady investment strategy and continue to adopt a rigorous risk management approach in assessing and evaluating all investments. The Group remains in a healthy position considering the somber circumstances faced by the commercial shipbuilding industry, with net gearing at 7%. Group’s outstanding order book to US$3.4 billion, comprising of 64 vessels; Company trades at a 5.1x P/E Concurrently, Yangzijiang cancels 4 orders as customers fail to pay; cites worsening of the commercial shipbuilding industry. Group has secured new customers for the 8 vessels previously ceased in 1H2012.