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Singapore “Flyer” of the Week: Yangzijiang Shipbuilding

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Shares of Yangzijiang Shipbuilding (SGX: BS6), a large shipbuilding enterprise in China, went up north by 6.6% thus far for the week. At the time of writing (11:00am, 20 June 2014), the company’s trading at $1.13.

Yangzijiang, which was once a component of the Straits Times Index (SGX: ^STI), became the first shipbuilding firm from China to be listed here. It owns one large dry dock and five large and medium-sized slipways. The main-stream products of Yangzijiang range from large and medium-sized containerships and large bulk carriers to medium-sized multi-purpose ships.

On Wednesday, the shipping outfit announced that it has secured contracts for its largest ever bulk carriers. The contracts are for four 260,000 deadweight tonnage (DWT) very large ore carriers (VLOCs) and they come from the company’s very first Australian customer.

The Australian company, which was not named, is an Australia-based ore corporation listed on the Australian stock market. Yangzijiang expects the deliveries of the VLOCs to take place between 2016 and 2017. The firm said that its ability to break into a new market like Australia demonstrates shipowners’ growing confidence in the shipbuilding capabilities of the firm.

Mr Ren Yuanlin, Executive Chairman of Yangzijiang, said, “Yangzijiang is emboldened to have secured its first ever 260,000DWT VLOCs order. The Group has observed that shipowners are enhancing their focus on vessels’ operational efficiencies and as a result, the shipbuilding industry is experiencing a rise in demand for larger vessels that provides higher carrying capacity. The demand uptrend for these cost effective and higher efficiency vessels is in line with the Group’s goal to scale the shipbuilding value chain”.

He added, “The Group will gradually reduce our investment in non-core businesses (investment in held to maturity and property development) and eventually divest these businesses. Going forward, we will augment our shipbuilding capabilities to better serve our customers by providing them with a wider range of sophisticated vessels, and particularly towards research and development to continuously improve our vessel designs and shipbuilding process”. The move follows the company’s decision to place undivided attention on its core shipbuilding business.

Then, on Tuesday, Yangzijiang made public that many prominent visitors – which include the Vice-premier of China’s state council, Ma Kai, and the Minister of Industry and Information Technology, Miao Wei – paid a trip to its Jiangsu New Yangzi yard for a tour on 18 June. Vice-premier Ma liked what he saw and he “fully acknowledged the excellent operating results and prospects of Yangzijiang.”

On the same day, Mr Ren was awarded the 2013-2014 Outstanding Entrepreneur Award by the Chinese Enterprises Association, China Entrepreneurs Association, and China Enterprise Management Science Foundation during the 2014 National Entrepreneurs’ Day cum Chinese Entrepreneurs Annual Meeting.  The award, which was given to Mr. Ren in the event held in Fujian, China, was to recognise his “outstanding contributions to the enterprises and the undertakings made in social and economic development”.

The firm is currently trading at a historical PE ratio of 7 and has a dividend yield of 4.4%.

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