YangZiJiang

YangZiJiang: Announce another yr of record rev and earnings for FY10, which exceeded average estimate consensus. 4Q10 Rev at Rmb4.9b, +19%YoY and +32.6%QoQ, while Net Profit at Rmb838.1m, +30%YoY and +14%QoQ. Result brings FY10 Rev to Rmb12.9b, +22%YoY and Net Profit at Rmb2.96b, +29%YoY….

Strong rev attributed to Grps deliverery of 48 vessels in FY10 vs 40 vessels in FY09), while grp’s Changbo yard (that was acquired last yr) delivered 2 vessels in 4Q10. Gross margins improved further from 21% in FY09 vs 22.5% in FY10 on increased efficiency in new yard and as yard continues to deliver bigger and higher margin vessels in FY10…..

Operating expenses for Grp remained stable at about 2% of the rev for FY10, while higher other income increased 143% in FY10 to Rmb876.2m, which was consistent with increase in investments in financial assets held-to-maturity during the yr….

We note that Grp has entered into 50 new shipbuilding contracts worth USD1.38b, bringing Grp’s order book at 131 vessels with value of USD5.31b as at 31Dec10 and contract winning momentum has continued into 2011, with Grp securing shipbuilding contracts worth USD147.4m for two 4,800 TEU container vessels and two 10,000 DWT bulk carriers, scheduled for delivery in 2012 and 2013 respectively…..

Grp’s remains confident of prospects and has guidance that its niche of building container vessels is starting to show positive signs and is working closely with interested customers to secure more container vessel orders, while grp’s Changbo yard is on track to reach its annual production capacity of 400,000 DWT by 2013….

At current levels, balance sheet remains strong, with grp having a Net Cash position, suggesting further appetite for expansion and acquisitions, while valuation appears compelling, with grp trading at 12.2x PE, vs peers average of 15x, with a Net Cash Position of 89c/share.