Some perspectives about the giant ship Yangzijiang

And so YZJ expectedly or unexpectedly reported an impressive 2Q18 results and pulled its price out of previous two months' slump. Not a lot higher than my EP of $0.955, but that's life, thanks to beloved Trump. (My reasons of buying was stated in June's update)

With a slightly lightened mood, in oblivion of AEM's plight, I have decided to dig deeper into YZJ in the following perspectives:

1. Top shareholders (based on quarter results PPT):


Obviously these big names like Blackrock, Norges Bank have disregarded the YZJ's S-chip status; even though Vanguard might be forced to buy since YZJ is in STI. I am surprised to see GMO was holding, and so as Value Partners from HK. Out of curiousity, I have tracked their buy/sell time and see how did they fare. (Of course this is just for fun, since we have no idea on their portfolio style, management, etc)



Obviously GMO has practiced buy low sell high, while Value Partners had up their stakes at a false dawn and reduced their exposures at the darkest period in year 2016 before ran away in last year's high.


SEB keep reducing their stakes until last year's high.


Whereas Alliance Bernstein suffered the same fate of Value Partners albeit in a much shorter timeframe.


Blackrock has been a loyal holder, even though they had sold low bought higher, perhaps they had a much better opportunity for that short window.

Overall, most funds have exited during 2017 high, while Norges Bank and Schroders have been reducing their stakes. The only positives is jp government pension fund have recently appeared as a top shareholder, aiming for its dividends most likely.

With so many big funds looking at YZJ as an alpha in the shipbuilding industry, I finally understand why is there so much volatility for this blue chip. As a noob, I thought blue chip should be less volatile; and looking from hindsight, my first entry for YZJ when it announced placement was a real dumb entry.

2. Core item in valuation: Held-to-maturity assets (HTM)

This is the crucial part of YZJ business where people often have doubts. Perhaps knowing this, YZJ has described more in their 2Q18 PPT.


Even analysts are divided on this part on how much they should worth. CIMB has done a nice compilation on their ROE and give it valuation of 1 PB.



While OCBC valued it using 0.6 PB, 0.1 lower than China banks' valuation, citing YZJ's short track record as reason.


The most optimistic valuation, 1.1PB was given by DBS, by using local banks as reference. Even though I like this valuation, but is this reference an appropriate one?


So how should we value this HTM if even analysts are so divided? Let's take a detail look on their HTM. Their main borrowers are from services, manufacturing and infrastructure; which are generally considered less risky; albeit in the form of collaterals, the % of shares is increasing.


And a detailed ROE for the past 10 years, after taking their impairment loss for HTM into account.



It can be seen that YZJ has started their focus in HTM in year 2009, and started to be more systematic in year 2011 where they started to provide allowance for impairment. Two points to be noted:

a) % of allowance has been increasing, perhaps due to their prudence and also to reflect the increasing risk of macro environment  (or perhaps because proportion of shares as collaterals is increasing?)

b) The average ROE for past six years is 9.4%, but ROE has been decreasing since 2015.

So how much valuation should YZJ's HTM be valued at? 0.6PB is definitely too conservative. 0.7PB, same as China's banks? It really depends on the bank's loan sector. China Merchants Bank has large proportion of loans from retail sector and hence it is valued at 1.3PB. With YZJ's HTM borrowers are from less risky sector, I would think 0.8PB to 0.9PB is a safe valuation to use, since there is already 10% allowance provided outside of book value. And this valuation is stationary, neglecting the return it generates.

Hopefully YZJ can secure more orders in the second half. As for the impressive results, actually quarter Y-o-Y or QoQ has no basis for comparison for YZJ, just like property stock, because their earnings are lumpy and largely depends on the ships completed for the quarter. I would rather look at remaining orders, new orders, new order price, steel price, RMB vs USD trend, BDI index, and others to monitor.

Comments

  1. Hello Everybody,
    My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of $250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of $250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.

    ReplyDelete
  2. Do you have a bad credit? Do you need money to pay bills? Is it necessary to start a new business? Do you have an unfinished project due to poor funding? Do you need money to invest in any specialty that will benefit you? And you do not know what to do. We offer the following loans;both Personal loans [secure and unsecured], Business loans [secure and unsecured] ,combination loans ,Student loans,Consolidation loans and so many others.
    Company name:Mike Morris Finance Group
    Company Email:Mikemorrisfinancegroup@gmail.com

    ReplyDelete
  3. DO YOU NEED A LOAN?
    We are a financial consultants that handles international finances for any amount of banking instruments. What about finding a reputable Debt Consolidation firm that can assist you in reducing monthly installment so that you will have affordable repayment options as well as room to breathe when it comes to the end of the month and bills need to get paid? Mr Steve Wilson Loan Firm (stevewilsonloanfirm@gmail.com) is the answer. Reduce your payments to ease the strain on your monthly expenses. Feel free to engage our leased facilities as We have provided over $2 Billion in business loans to over 25, 000 business owners just like you. We use our own designated risk technology to provide you with the right business loan so you can grow your business. Our services are fast and reliable, loans are approved within 24 hours of successful application.
    LINE ID:3091140693
    Whatsapp:+14027300344
    company website: https://stevewilsonfinancialloanfirm.weebly.com

    * Personal loans

    * Truck Loans

    * Car Loans

    * Real Estate Loans

    * Refinancing Loans

    * Debt consolidation loans

    * Education Loans

    * Farm Loans

    * Corporate Loans

    * Business Start-up Loans

    We offer loans from a minimum range of $50,000 to a maximum of $500 million, STEVE WILSON LOAN FIRM Will give you loan with an affordable interest rate of 2% and loan duration of 1 to 30 years to pay back the loan (secure and unsecured). Our aim is to provide Excellent Professional Financial Services. Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we will work together for the benefits of all parties involved. Do not keep your financial problems to yourself in order for you not to be debt master or financial stress up, which is why you must contact us quickly for a solution to your financial problems. It will be a great joy to us when you are financially stable
    Email us via: stevewilsonloanfirm@gmail.com
    LINE ID:3091140693

    Yours Sincerely,
    Mr Steve Wilson.
    LINE ID:3091140693
    Whatsapp:+14027300344
    company website: https://stevewilsonfinancialloanfirm.weebly.com



    We are certified and offer fast and reliable services

    ReplyDelete
  4. JAK DOSTAŁEM POŻYCZKĘ OD MARY KENT?
    To jest zmiana życia! potrzebowałem pożyczki, aby otworzyć moją restaurację i bar, kiedy jeden z moich partnerów biznesowych przedstawił mnie temu dobremu i zaufanemu pożyczkodawcy STEVE WILSON, w końcu Bóg uśmiechnął się do mnie, kierując mnie do tego nowego pożyczkodawcy, który w tym roku wywołał uśmiech na mojej twarzy i nie oszukał mnie, a także nie oszukiwał ani nie okłamywał mnie, ale ten pożyczkodawca udzielił mi 2% pożyczki, która wynosi 750 000 dolarów amerykańskich po mojej zgodzie na warunki ich firmy i jedną istotną rzeczą, którą kocham w tej firmie pożyczkowej że są bardzo szybkie,
    Możesz skontaktować się z pożyczkodawcą za pośrednictwem EMAIL :stevewilsonloanfirm@gmail.com
    strona internetowa firmy: https://stevewilsonfinancialloanfirm.weebly.com

    ReplyDelete

Post a Comment