Yangzijiang

Yangzijiang: Grp recently announced that it has clinched its first offshore order worth US$170m for a jack-up drilling rig for a subsidiary of Mena Offshore Investments, a Malaysian-domiciled fund. This contract does not come as a surprise – YZJ’s management had mentioned as early as Mar this year that there were plans to build two jack-up rigs in the Taicang yard, and newswires had also reported earlier that Yangzijiang Offshore Engineering was set to build a jack-up rig for Qatar Investment Corporation. The greatly reduced new order flow for bulk carriers and containerships that Chinese yards such as YZJ have been reliant on have forced them to seek new grounds. Time will be needed for significant earnings contribution from the offshore division, and still expect 2H13 and 1H14 to be the most difficult period for the group. House maintain HOLD with fair value estimate of $0.95.