CGS-CIMB Research is maintaining its “add” call and target price of $1.37 on Yangzijiang Shipbuilding.

At this price the counter will have a 40.2% upside from its 97.5 cent close on Feb 9, analyst Lim Siew Khee writes in a flash note.

“Yangzijiang [is] one of our high-conviction picks in Singapore,” stresses Lim whose optimism follows the company’s recent announcement of securing US$1.3 billion ($1.72 billion) of contracts for 29 vessels. Of these, 22 contracts are for containerships.

See: Yangzijiang secures US$1.3 bil worth of new orders for 29 vessels

A key positive is its win – for the first time – from Shanghai Zhonggu Logistics, one of China’s largest domestic shipping liners, notes Lim. As part of this, the shipbuilder will supply 10 units of 4,600 TEU containerships. 

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“We are positive on the fact that Yangzijiang is making firm inroads with Chinese companies and competing head-on with state-owned yards,” she adds.

Its other wins with major Chinese companies include SITC, Zhejiang Seasport Shipping, Shanghai Ganglu Shipping and Shanghai Baosteel.

Aside from this, the company has secured four orders for its ultra-large 24,000 TEU containerships and eighs units of 1,800 TEU containerships.

It also has orders for some bulk carriers such as an 82,300 FWT bulk carrier, four units of 66,000 DWT bulk carriers and two units of 31,800 DWT great lake bulk carriers.

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With this, Lim estimates Yanzijiang’s order book to be around US$3.7 to US$3.9 billion. She has also factored in US$1.8 billion in new orders for its ongoing FY2021.

Lim adds that its strong net cash of RMB4.4 billion or 22 cents a share at end-September 2020, should allow it to sustain its above-market yield of 4.3%. 

For 4Q2020, she estimates the shipbuilder’s net profit to come in at RMB1 billion but cautions that there may be an earnings downside if the company records high forex losses since the RMB dipped 4% q-o-q.

As at 10.55am, shares in Yangzijiang were flat at $1.05.