Your 60-Second Analysis on Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) Shares
 
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Your 60-Second Analysis on Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) Shares

Sudhan P
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In this series, we will feature one Singapore-listed company each time as a quick guide to everything you should know about it in 60 seconds.

In this instalment, we have Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6). Previously, we featured SATS Ltd (SGX: S58), a provider of food solutions and gateway services solutions.

What’s Yangzijiang’s Business About? 

Yangzijiang, founded in 1956, is one of the largest private shipbuilding companies in the world, with a top spot in China. 

Yangzijiang has four shipyards in Jiangsu Province, China, and they are along the Yangtze River. Together, the yards produce a broad range of commercial vessels including large containerships, bulk carriers and liquefied natural gas (LNG) carriers, serving customers from Northern America, Europe and other parts of the world. 

Yangzijiang’s Financial Highlights 

Yangzijiang’s revenue comes from two business segments, namely, shipbuilding and investments.

The shipbuilding-related business contributes to around 90% of Yangzijiang’s total revenue. 

Over the last five years, Yangzijiang’s net profit has not grown much, as seen from the table below:

 20142015201620172018
Revenue
(RMB’000)
15,353,551 16,014,34815,089,43819,205,59623,238,289
Net profit
(RMB’000)
3,482,9222,459,6001,752,4322,931,4983,614,044
Net profit margin22.7%15.4%11.6%15.3%15.6%
Return on equity 17.0%11.3%7.8%11.3%12.5%

From 2014 to 2018, revenue grew 10.9% per annum, but net profit climbed just 0.9%. With that, the net profit margin fell from 22.7% to 15.6%.

Return on equity, which reveals management’s ability to grow shareholders’ capital, declined from 17% to 12.5% over the past five years.

Yangzijiang’s Dividend History

Yangzijiang’s dividend has been far from consistent from 2014 to 2018. 

In fact, the company’s dividend per share has fallen from 5.5 Singapore cents to 5.0 Singapore cents over the time frame.

 Total dividend
(Singapore cents per share )
20145.5
20154.5
20164.0
20174.5
20185.0

Major Risks for Yangzijiang to Take Note Of

The commercial shipbuilding industry is highly cyclical in nature, which means that the demand for Yangzijiang’s shipbuilding services can fluctuate widely.

Also, the pricing of Yangzijiang’s vessels is sensitive to economic conditions around the world, especially in the US and China. The trade war between the two giants is still ongoing, even though there seems to be some respite of late. Any future deterioration in the global economy could hurt Yangzijiang’s business.

Yangzijiang’s Share Price and Valuation

Over the past five years, Yangzijiang’s share price has fallen some 8%.

Source: Google Finance

At Yangzijiang’s share price of S$1.16, it has a price-to-earnings (PE) ratio of 6.4 and a dividend yield of 4.3%.

In comparison, the Singapore stock market, as represented by the Straits Times Index, has a PE ratio of around 12. This could signal that Yangzijiang is undervalued.

Having said that, investors have to discern whether it’s worth owning shares in a cyclical company that’s struggling to grow its net profit.

Want to discuss further?

Why not check out Seedly’s QnA and participate in the discussion surrounding stocks like Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) and many more!

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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