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SWEE SWEE
TOK KONG MAN
Yangzijiang steams ahead with
acquisition of another yard in
China
��
Shipyard and then injected additional capital in it
Acquired 51% equity stake in the capital of Jiangsu Changbo��
RMB156.1 million of total amount invested��
book worth USD338 million comprising 20 vessels
The acquired yard has an outstanding shipbuilding orderSINGAPORE – 28 June 2010 – Yangzijiang Shipbuilding (Holdings) Limited
(“Yangzijiang” or “the Group” or “
enterprising shipbuilder listed on the SGX Main Board, is pleased to announce that it has
through its wholly-owned subsidiary, Jiangsu Yangzijiang Shipbuilding Co. Ltd
(“JYSCO”), today acquired 51% of the equity interest in the capital of Jiangsu Changbo
Shipyard Co., Ltd (
JCSC is located at the downstream of the Yangtze River which is 5 kilometres away
from Yangzijiang’s wholly-owned subsidiary, Jiangsu New Yangzi Shipbuilding Co., Ltd,
and it is at the opposite side of the Yangtze River facing JYSCO. JCSC is a company
incorporated in Jingjiang City on 1 August 2001 with a registered authorised share
capital of RMB100 million and its principle activities are shipbuilding, ship repair,
production and processing of large scales steel structures. JCSC owns shipbuilding
facilities with a production area of 286,471 square meters and has a 926 meters deep
water coast line with production capacity of 400,000 DWT. JCSC currently has an
outstanding order book worth USD338 million comprising 20 vessels that are contracted
Other than JCSC’s order book and existing yard facilities, the rationale for this
acquisition is also to consider this as an alternative option to construct small capacity
vessels that are currently build in JYSCO. With the completion of the acquisition, JCSC
would be renamed as “Jiangsu Yangzijiang Changbo Shipbuilding Co., Ltd.” (
博造船有限公司 “This recent acquisition will be a value-add for the Yangzijiang Group based on
the compelling price of acquisition and on the yard’s strategic location and
proximity to the Group’s existing yards. Moreover, this new yard will serve as an
alternative production area to our old yard in building small sized vessels. We are
enthusiastic about integrating this yard in the Group and are confident that this
will be done without incurring substantial costs.” Mr Ren Yuanlin ( Pursuant to the agreements that Yangzijiang entered into with Jiangsu Changbo
Automobile Ferry Co. Ltd (the “Vendor”), Jiangsu Changbo Group Co., Ltd, and Hong
Kong Haitian International Trade Co., Ltd (last two as the “Remaining Equity Holders”),
the capital reserves of JCSC would be increased by RMB156.1 million to RMB241.9
million immediately after the acquisition. The total investment made by Yangzijiang in
JCSC was RMB156.1 million (of which RMB51.0 million was paid to acquire 51% of
equity interest of JCSC and RMB105.1 million was to increase the capital reserves of
JCSC) and Yangzijiang’s share in the increased equity capital of JCSC is RMB174.4
million. The amount of the investment was arrived on an arms’ length negotiations on a
willing buyer, willing seller basis taking into account,
value amount of RMB185.8 million of JCSC for FY2009.
Also, under the agreement, there is a transition period of 6 months (from the date of the
acquisition completion), which can be extended to 12 months. At the end of this
transition period, JCSC is to commission an independent auditor to audit its net tangible
assets at 31 December 2010 or 30 June 2011 (the “NTA”); the Remaining Equity
Holders warrants and guarantees in respect of the NTA, that:
(a) If the NTA is less than RMB156,120,000, any shortfall should be made up by the
Remaining Equity Holders in cash within Twenty (20) Business Days from the
issuance of independent auditor report;
(b) If the NTA is RMB156,120,000 and above but less than RMB306,120,000 (including
the made up of the NTA to RMB156,120,000 as per para (a) above), the Remaining
Equity Holders should make up any shortfall in cash in order to maintain their 49%
equity interest in the capital of JCSC. Otherwise, the Company will be entitled to
increase its equity interest of JCSC based on the percentage of the total investment
If there is a surplus from RMB306,120,000, i.e. the NTA above RMB306,120,000, all
parties will be eligible to share the surplus based on their respective equity interest
in the capital of JCSC.
The investment will not have any significant impact on the earnings per share and net
to be delivered between the second half of 2010 and mid of 2012.
cost by the Company over the NTA.
tangible assets per share of Yangzijiang for FY2010.
SWEE SWEE
TOK KONG MAN
CHEONG ARH....
SWEE SWEE
TOK KONG MAN
Saturday: 26th JUNE 2010
BAKER TECH EGM
Monday: 28th JUNE 2010
Yang Zi Jiang
BREAK OUT S$1.40
From DBSV:
Yangzijiang: BUY; S$1.35; Bloomberg Code: YZJ SP
Qatar investor coming on board
Price Target : 12-Month S$ 1.80
by: Pei Hwa HO +65 6398 7968
Qatar investor’s 2.3% stake in Yangzijiang is a vote of confidence
to its prospect.
The partnership lays the path for Yangzijiang into Middle East
market.
Our TP of S$1.80 offers 33% upside.
Catalysts: strong order wins, yard acquisition and strategic
partnership in offshore.
Ties the knot with Qatar investor. Yangzijiang announced that QD Asia
Pacific (QD), the Middle East partner in the acquisition of PPL Holdings,
is subscribing for 84m new shares in Yangzijiang, or 2.3% of existing
shares at S$1.295 per share, regardless of the outcome of the PPL
acquisition. The subscription was previously conditional on the completion
of PPL acquisition. Other conditions to be fulfilled are: (1) NAV of
Yangzijiang shall not decrease by >30% from end 09; (2) approval for the
issuance and listing of new shares from relevant regulatory authorities
shall be obtained by 27th Oct 2010. QD is a subsidiary of Qatari Diar Real
Estate Investment Company, one of the sovereign wealth funds of the state
of Qatar.
Good partnership. We view Yangzijiang's tie with QD positively given: (1)
QD's subscription is a vote of confidence to Yangzijiang's execution and
prospect; (2) QD's presence strengthened Yangzijiang’s penetration into the
Middle Eastern offshore market. This also reinforces our belief that
management is determined to pursue its goals in the offshore market
although PPL acquisition receives no blessing from Sembcorp Marine.
1-2% RMB appreciation is manageable. On a separate note, our economist
forecasts a 1-2% RMB appreciation in 2H10 after Chinese government’s
announcement to increase the flexibility of exchange rate. This is unlikely
to have material impact on Yangzijiang's earnings in 2010 as most of the
USD exposure has been hedged at the rate of c. RMB6.8/USD. In addition,
bulk of current order book was secured in peak cycle of 07/08 at high
price, which has already factored in higher steel cost and RMB
appreciation. Furthermore, this could be passed on to shipowners by
lowering price discount (up to 10%).
Catalysts ahead. We see price catalysts from strong order wins, potential
yard acquisition at cheap valuation and strategic partnership into
offshore. Reiterate BUY. Our TP of S$1.80 is pegged at 14x FY10 earnings.
kiasiDBT ( Date: 22-Jun-2010 09:43) Posted:
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From OCBC:
Yangzijiang Shipbuilding: China shipbuilding orders up
China shipbuilding orders up.
and Information Technology, new ship orders in China rose from 12.8m
gross tons YTD in Apr '10 to 19.6m gross tons YTD in May '10 . This
compares to just 1.2m gross tons YTD in May '09. Though we are more
circumspect on orders from Europe, we note that are still new orders such
as Hyundai Mipo Dockyard winning an order for six bulk carriers from a
European client .
According to Beijing's Ministry of IndustryInvests in VC funds.
RMB153m for a 51% stake in Jiangsu Runyuan Microfinance Co, a licensed
company to provide microcredit to enterprises and individuals. The group
has also invested RMB60m for a 20% stake in Jiangsu Huagong Venture
Capital Co with partners such as the Yangzhou City Mangshan District
Government. Together with its 20% interest in Everbright Venture Capital
Jiangyin Co, YZJ has poured in RMB313m into these investments. These
investments represent just 4% of the group's cash and about 4.5% of its
NTA as at 31 Mar 2010, it is comparable to the amount of dividends paid in
a year (RMB311m in FY09 and RMB431m in FY08). As these are fairly
long term investments, we do not expect any significant financial impact
for the near to medium term.
Last week, Yangzijiang Shipbuilding (YZJ) investedMiddle Eastern investor takes a stake.
that Middle Eastern investor, QD Asia Pacific, will subscribe for 83.6m new
shares in YZJ, owning 2.24% of the enlarged capital. QD Asia has decided
to proceed notwithstanding the outcome of the PPLH deal. Recall that YZJ
had previously said that it had entered into a placement agreement with
various parties to acquire PPLH. The move will allow YZJ to extend its
reach into the Middle East by tapping into Qatari Diar's network. The group
also intends to use net proceeds for potential M&A opportunities.
The group announced yesterdayUpgrade to BUY.
more time may be needed for the PPLH deal to reach a conclusion. Eurozone
uncertainties still remain but assuming a fall-out in the region does not
happen, we think the possibility of substantial order cancellations remains
low for now (refer to earlier report 4 Jun 2010). With an upside potential of
about 19%, we upgrade YZJ to
intact.
Yangzijiang Shipbuilding: China shipbuilding orders up
New ship orders in China rose from 12.8m gross tons YTD in Apr '10 to
19.6m gross tons YTD in May '10. This compares to just 1.2m gross tons
YTD in May '09. Yangzijiang Shipbuilding (YZJ) has invested RMB313m in
VC funds to generate capital gains, amongst other aims. Though this
represents just 4% of the group's cash and about 4.5% of its NTA, it is
comparable to the amount of dividends paid in a year. As these are fairly
long term investments, we do not expect any significant financial impact
for the near to medium term. Middle Eastern investor, QD Asia Pacific, will
also subscribe for 83.6m new shares in YZJ, owning 2.24% of the enlarged
capital. Eurozone uncertainties still remain but assuming a fall-out in the
region does not happen, we think the possibility of substantial order
cancellations remains low for now. With an upside potential of about 19%,
we upgrade YZJ to
kiasiDBT ( Date: 21-Jun-2010 23:47) Posted:
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QD Asia Pacific Ltd will subscribe for 83,555,000 new shares in Yangzijiang, notwithstanding outcome of acquisition of PPL Holdings
Open up doors to Middle East region
SINGAPORE – 21 June 2010 – Yangzijiang Shipbuilding (Holdings) Limited (“Yangzijiang” or “the Group” or “扬子江船业控股公司”), one of PRC’s leading and most enterprising shipbuilder listed on the SGX Main Board has today entered into a deed of amendment and restatement (“Deed”) with QD Asia Pacific Ltd. (“QD Asia”), whereby QD Asia has agreed to proceed with its subscription of shares in Yangzijiang notwithstanding outcome of completion of the PPL Holdings acquisition ("Acquisition"), provided that the other conditions precedent to completion of the placement are satisfied on or before 27 October 2010 (or such other date as may be agreed between the parties).
Yangzijiang had previously announced on 17 April 2010 that it had entered into a placement agreement with QD Asia and a joint investment agreement with Mediterranean Success Inc. to acquire PPL Holdings in the proportions of 50.1%, 45% and 4.9% respectively.
Upon the completion of the share placement, QD Asia will own 2.235% of the enlarged share capital of Yangzijiang.
QD Asia is a wholly-owned subsidiary of Qatari Diar Real Estate Investment Company (“Qatari Diar”), one of the sovereign wealth funds of the state of Qatar. Qatar has 2nd highest GDP per capita in the world and is a state rich in oil and gas resources with the 3rd largest gas reserves1. Yangzijiang welcomes Qatari Diar as a valued investor, and expects that Qatari Diar’s investment will serve as an excellent platform for Yangzijiang to extend its reach into Middle East region by tapping into Qatari Diar’s network.
“We are delighted to have Qatari Diar of Qatar state-owned parentage on board. I am looking forward to our cooperation and am truly enthusiastic about harnessing important business synergies that will benefit Yangzijiang.”
Mr Ren Yuanlin (任元林), Executive Chairman, Yangzijiang
The net proceeds will be used for potential M&A opportunities in the shipbuilding and marine offshore industries.
“Recently, we invested in several projects to widen our investment portfolio and also, as part of our efficient cash redeployment scheme. These investments are capped at a small percentage of our cash resources, and the majority is reserved for working capital and M&A opportunities in our core shipbuilding and related fields, to build long term sustainable shareholders’ value.”
Mr Ren Yuanlin (任元林), Executive Chairman, Yangzijiang
Firmer dry bulk orders in Apr-May; approaches high-cycle level.
Sustainable order momentum bodes well for orderbook replenishment.
Reiterate BUY on key beneficiaries - Cosco and Yangzijiang.
Raised Yangzijiang’s FY10-11 earnings by 6-20% on higher order
assumption.
Apr-May orders approaching high-cycle level. New orders for bulk carriers in May’10 hit a high of 7.8m tons, up from 7.1m tons in Apr.
This is the highest monthly orders achieved post Sept’08 financial crisis. The average orders of >7m dwt/month traced back to high-cycle levels in late 2006 /early 2007, just before the dry bulk superboom in 07/08. With 5M10 orders already at 25.3m tons, this year’s orders look set to outstrip last year’s 28.4m tons. At this pace, new orders could potentially double in 2010.
Sustainable order momentum. In spite of huge order backlog, new orders for bulk carriers unexpectedly gained momentum over the past few months.
We believe the momentum is sustainable on the back of global economy recovery, stronger Asia demand, lower newbuild prices and firm BDI above 2500 level.
High enquiry level at yards. Our on-the-ground checks suggest high enquiry level, which will likely translate into firm orders in the months ahead.
Demand comes largely from Asia’s small-medium shipping companies and cash rich enterprises (ie, power, steel and commodity companies etc) looking to order low price vessels on favorable risk/reward ratio.
Raising the bar for Yangzijiang. Yangzijiang’s YTD order win of US$356m has exceeded our assumption of US$200m. Hence, we are raising it to US$600m in anticipation of more contracts in 2H10. As a result, we raise our net profit forecasts in FY10-11 by 6%-20% to RMB2.2bn and RMB2.4bn respectively, and up our TP from S$1.75 to S$1.80.
BUY into Cosco’s recovery and Yangzijiang’s execution. Cosco and
Yangzijiang stand to benefit from the favorable industry trend.
We like Cosco [BUY; TP S$1.80] for its shipbuilding recovery and offshore contract catalysts; and Yangzijiang [BUY; new TP S$1.80] for its proven management execution
kiasiDBT ( Date: 21-Jun-2010 23:46) Posted:
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