<News Analysis> Start the year with a bang
- Secures new orders for six units of 13,000 TEU methanol dual-fuel containerships totaled over US$1bn, based on our estimate
- A strong boost to order outlook with the sizeable new wins making up over a third of its annual order win target of US$3bn
- Well-equipped and positioned to ride on decarbonisation and fleet rejuvenation trends in shipping
- Reiterate BUY and TP S$1.90; decent 4% dividend yield
What has happened
Yangzijiang has secured contracts to build six units of 13,000 TEU methanol dual-fuel containerships for Ocean Network Express (ONE). We estimate that total contract value could worth over US$1bn, assuming current market price of ~US$170m for similar vessels, reported on Clarksons. The sizeable new wins would make up over a third of company’s annual order target of US$3bn, which is very promising given we are only 2-3 weeks into the new year, raising Yangzijiang’s order wins prospects.
The vessels are scheduled to be delivered from 2027 onwards as yards are very full for next 3-4 years. Yangzijiang’s orderbook stands at all time high of c. US$15bn, which implies over 4.5-years of revenue coverage. Management has shared about plans to expand capacity in vicinity of its existing yard facilities. Besides adding on shipbuilding capacity, this could also pave the way for new retrofitting business that expected to see demand surge from 2025 upon availability of main engine supply. This would call for earnings upgrade as market has yet factored in capacity expansion. We also expect potential earning upside surprise in the upcoming results especially on the shipbuilding margin front.
Customer, ONE, is a Japanese container transportation and shipping company jointly owned by the Japanese shipping Lines Nippon Yusen Kaisha, Mitsui O.S.K. Lines, and K Line. Yangzijiang’s partnership with Mitsui E&S shipyard seems to be bearing fruit, opening up Japanese market with partner Mitsui bringing in Japanese designs and construction technology.
Reiterate BUY and TP S$1.90 (1.7x FY24PB, implied 10.2x PE). Yangzijiang is a prime beneficiary of decarbonisation and clean vessel trends in shipping market. It remains focused on higher value-add dual-fuel vessel, tanker and possibly pure car, pure truck carrier (PCTC). It offers decent dividend yield of c.4%.