Yangzijiang

Yangzijiang: Yangzijiang races to a new one year high of $1.235, having climbed 50% over the last six months. Often touted as one the most efficient yards in China, the group is one of the better proxies to the anticipated China shipbuilding sector recovery. In 2013, the group secured 52 shipbuilding contracts worth US$2.1b, compared to just US$0.3b of orders clinched for the whole of FY12. Going forward, the group guides that its outstanding order book of ~US$3.7-US$3.8b comprising of 88 vessels, will keep its yards busy until 2016. This is a positive contrast to the order dry spell currently experienced by the smaller yards in China. In addition, Yangzijiang has a further 28 outstanding options worth US$1.36b, some of which are due to be exercised by the end of the year. With limited capacity to take on new orders, Yangzijiang aims to focus on securing orders for more technologically advanced vessels. Management believes an imminent cut in the current excess shipbuilding capacity in the industry may result in increased market share for the group. At the current price, valuations are undemanding with the group trading at 7.6x forward P/E versus peer Cosco at 35.7x. Overall, the street has 8 Buys, 6 Holds and 3 Sell ratings with a consensus TP of $1.32.