Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) is one of the largest private shipbuilding companies in China.
It builds a wide range of commercial vessels, including large containerships, bulk carriers and liquefied natural gas (LNG) carriers at its four shipyards in Jiangsu Province, China.
Over the past year from 1 Jan to 31 Dec 2018, Yangzijiang’s total return, which includes reinvested dividends has underperformed the STI index (SGX: ^STI), with the former dropping 11.4% compared to the latter that lost 6.5%.
Has the lackluster performance by Yangzijiang’s share price in 2018 made it a bargain at current prices?
Four metrics, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and the net debt to equity ratio could provide some clues.
The shipbuilder has recorded a trailing twelve months (TTM) earnings per share of RMB$ 0.78 which converts to S$0.15 (S$1 = RMB$5). With Yangzijiang’s current share price at S$1.30, this implies a P/E ratio of 8.6.
The past four years (2014-2017) has seen the shipbuilder’s P/E range from 6.15 to 9.72, this means that at its current P/E, Yangzijiang is sitting comfortably within the range.
At the end of the third quarter of 2018, Yangzijiang reported a Net Asset Value of RMB$6.92 (S$1.38). This results in a P/B ratio of 0.94 at current prices. The P/B ratio for Yangzijiang over the past four years has ranged from 0.66 to 1.10. Again, this means that at current prices the shipbuilder is well within this historical range.
At end September 2018, Yangzijiang was in a net cash position of RMB$3.8 billion, while total equity stood at S$28.2billion. The shipbuilder has consistently maintained a net cash position over the past four years, indicating a spotless balance sheet.
Lastly, the shipbuilder’s dividend has decreased slightly over the last four years, moving from S$0.055 in 2014 to S$0.45 in 2017. Assuming the company pays out a dividend at the same rate as in 2017, this would lead to a yield of 3.5% at current prices.
Looking at the four metrics, investors can see that Yangzijiang is attractively priced based on its P/E and P/B ratio. The company has a near-perfect balance sheet by virtue of it being in a net cash position.
The only metric that didn’t do so well was the decreasing dividend. However, with a dividend yield of 3.5% investors should have little to complain about.
But investors should only use the analysis here to provide a starting point for further evaluation.
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The Motley Fool Singapore writer Esjay contributed towards this article. Esjay does not own shares in Yangzijiang.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.