MARKET TALK: Yangzijiang Shipbuilding's Move Into O&M Positive -Barclays Capital

0056 GMT [Dow Jones] STOCK CALL: Yangzijiang Shipbuilding (BS6.SG) posted strong core 4Q11 results, Barclays Capital says, noting 4Q11 gross margin of 30% was a significant sign that efficiency gains at the yard continue to outpace cost inflation. The house notes the FY11 orderbook of US$4.7 billion translates into 188% of FY11 revenue. It notes the company identified a location for its new offshore yard, with construction set for 2012-13; BarCap views the move as incrementally positive, calling it “a tangible and credible move by YZJ into a higher-value and large new end-market.” BarCap expects a valuation uplift from contributions from offshore oil and gas construction, compared with traditional shipbuilding multiples. “We see ample room for multiple uplift, given the orderbook stands at US$4.9 billion implying 0.9X EV-to-orderbook and YZJ trades at just 6.6X FY11 P/E and 1.8X FY12E P/B compared to a FY11 ROE of 35%.” It keeps an Overweight call with S$2.20 target on the stock; the shares ended Wednesday up 0.7% at S$1.36.

  • Leslie Shaffer, Dow Jones & Company