Yangzijiang

Yangzijiang: Counter could see a positive boost after the group announced that since 26th April, it has secured contracts for another 15 vessels valued at ~US$414m. The contacts comprised of six 82,000 DWT bulk carriers, eight 64,000 DWT bulk carriers and one 94,000 DWT transload vessels, with expected delivery in the period from 2015- 2016. As of 1H13 the group has secured 27 shipbuilding contacts worth ~US$1.01b and has 51 options worth ~US$2.46b, we note that the figure is much higher versus the US$0.3b worth of orders secured in FY12 for 11 vessels. Adding to the order wins is 22 options for containerships worth US$1.56b and 29 options for bulk carriers worth ~US$1.08b. With the Baltic Dry Index reaching its 52 week highs, Yangzijiang is confident that more bulk carrier options will be exercised going forward. To mitigate some concerns of declining margins going forward, we note that the group’s FY12 gross margins was stable, at 31% which was flat on a y/y basis. Separately, Yangzijiang has acquired the remaining balance of 49% of the equity interest in the capital of Jiangsu Yangzi Changbo Shipbuilding for Rmb110m, a prove of ongoing consolidation within China’s shipbuilding industry. In a negative report by Bloomberg, industry sources cite that China may see a third of its yards shut down in about five years as they struggle to win orders amid a global vessel glut. China Rongsheng Heavy Industries, the nation’s biggest yard outside state control, fell the most in almost a year in Hong Kong trading on July 3 after saying some idled contract workers surrounded the entrance of its main factory.