Your 60-Second Analysis of Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) Shares
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:
|Net profit margin||22.7%||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.
(Singapore cents per share )
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%.
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.
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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.