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Yangzijiang embarks on aggressive share buybacks

Amala Balakrishner
Amala Balakrishner • 4 min read
Yangzijiang embarks on aggressive share buybacks
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(Sept 2): Yangzijiang Shipbuilding has been on a share buyback spree over the past two weeks. On Aug 29, the company bought one million shares at 91 cents each, bringing its total treasury shares to 46,311,800. This follows the two million shares it bought on Aug 28 — one million at 91 cents each and another million bought later in the day at 90 cents each.

Earlier, the company had bought two million shares at 92 cents each on Aug 27 and one million shares at 95 cents each on Aug 26. It had bought a total of 10 million shares between Aug 15 and 22, at prices ranging from 87 cents to 95 cents.

Year to date, the company’s share price has dropped 27.2% to close at 91 cents on Aug 29. This values the company at $3,575.2 million and implies a price-to-earnings ratio of 4.89 times.

The company launched its IPO on the Mainboard of the Singapore Exchange in April 2007, selling 662 million new shares and 331 million existing shares at 95 cents each.

This recent spate of share buybacks is the first since a series made in July last year. Back then, the price was around 86 cents a share.

The most recent buybacks by the company come after turbulence in its stock price. The shares fell about 30% on Aug 8 after a query from SGX on its price fluctuations. Minutes later, Ren called for a trading halt, which rumours say was because a certain Liu Jianguo, a supposed “veteran political patron in the shipbuilding industry” and Yangzijiang’s largest shareholder, was under probe by the Central Commission for Discipline Inspection in Beijing, the anti-graft body of China’s Communist Party.

The leave was called upon to “assist in a confidential investigation carried out by certain [Chinese] governmental authorities”, the company noted in a filing response just before the company lifted its trading halt a week later on Aug 15.

Shares in the company — the largest non-state-owned shipbuilder in China — showed little sign of easing and plunged 18 cents after the lift. The trend reversed a day later, however, with the counter rising 6.1% by midday.

After news of the investigation broke out, the company announced it had won new orders for the two 325,000 dwt bulk carriers it secured earlier last week from a ship owner based in Asia. The company will build these carriers at its Xinfu shipyard in Jiangsu province and is looking to deliver them by 2021.

Following the announcement, CEO Ren Letian also announced that the company had reached a milestone: It has launched a vessel using a floating dock instead of a slipway or dry dock. This was carried out with its partner Mitsui on a 82,000 dwt vessel at the Taicang yard also in Jiangsu. Letian, son of chairman Ren, notes that the method “has the advantages of improving shipbuilding efficiency, increasing output without having the limitations of dock capacity, reducing investment costs and enhancing capacity quickly”.

In its most recent 2QFY2019 results, the company reported earnings of RMB936 million ($181.7 million), down 6% y-o-y. This follows a 12% drop in revenue to RMB7 billion, on the back of a RMB5.2 billion decline from its core shipbuilding after the delivery of 18 vessels instead of the initial 20. That translated into earnings per share for the quarter to 23.73 RMB cents, down from 25.08 RMB cents in the previous year.

The group also secured new orders in the quarter, bringing the total number of orders to five vessels, with a total contract value of US$209 million ($290.1 million) for 1HFY2019 ended June 30. DBS analyst Ho Pei Hwa is optimistic of the group’s ability to secure contracts, but notes that management should allay shareholders’ fears on Liu’s role in the business. Still, she maintains a “buy” call on the stock, at a 12-month price target of $1.82.

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