UOB Kay Hian is keeping its “buy” recommendation on Yangzijiang Shipbuilding (YZJ) with a target price of $1.17, while keeping the stock as one of its top picks for 2021, on the back of the resumption of earnings growth, undemanding valuations and strong financial position.

According to analyst Adrian Loh in a Jan 4 report, YZJ remains a compelling stock for 2021 as its valuations remain undemanding, with 2021 EV/EBITDA and price-to-book (P/B) multiples of 2.6 times and 0.52 times respectively, a price-to-earnings (P/E) growth ratio of 0.69 and net cash of 22 cents/share (or 23% of its current share price).

“In addition, if we add its net cash position to the current portion of its debt investments of RMB13.6 billion as at end-3QFY2020, this would be equivalent to its current market capitalisation of $3.5 billion. This implies that investors are essentially getting its shipbuilding business for free,” adds Loh.

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