SINGAPORE (Sep 25): OCBC Investment Research has downgraded China shipbuilder Yangzijiang to a “hold” in an update report on Sept 24.

OCBC says Yangzijiang remains exposed to risks from its financing business while its share price has appreciated.

Having weathered the recent shipbuilding slowdown well, Yangzijiang has amassed a cash pile of RMB7.6 billion ($1.6 billion), in addition to its held-to-maturity (HTM) assets of RMB13 billion as at 2Q14. But the group also has borrowings of about RMB11.4 billion and a significant portion of Yangzijiang’s held-to-maturity assets are entrusted loans.

Although OCBC expects Yangzijiang to pare its RMB13 billion HTM assets down to about RMB12 billion by the end of this year, it may take some time before the group is able to unwind most of its HTM assets, the research house adds.

Meanwhile, Yangzijiang’s share price has appreciated by about 11% since OCBC upgraded the stock to “buy” on 6 Aug, compared to the STI’s flattish performance over the same period.

As such, OCBC now see limited upside potential after its good price performance and has downgraded its rating to “hold”. OCBC's fair value estimate of the stock has been risen from $1.21 to $1.24, after updating its CNY/SGD exchange rate assumptions.

Yangzijiang is down 0.43% at $1.17 as at 11:54 am Singapore time.