Hot stock: Yangzijiang Shipbuilding wins new orders. Here's why its share price is rising

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By Beansprout • 26 Jun 2023 • 0 min read

Yangzijiang Shipbuilding’s share price rose sharply on 26 June after it announced new order wins.

yangzijiang shipbuilding 26 june 2023

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What happened?

Yangzijiang Shipbuilding’s share price rose sharply following the market open on 26th June.

As at 11.15am, its share price was at S$1.35, representing a 5.5% increase from its closing price of S$1.28 on Friday 23 June. 

Let’s take a look at what might be driving the strength in Yangzijiang Shipbuilding’s share price 

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Source: Google

 

What is driving the rise in Yangzijiang Shipbuilding’s share price?

#1 – Secure orders for new vessels

Yangzijiang Shipbuilding announced that it has secured orders for three vessels from Norwegian ship owner Klaveness Combination Carriers. 

According to shipping industry publication Tradewinds, the total contract value is estimated to be about US$180 million, based on the value of each of vessel at about US$60 million.

Yangzijiang Shipbuilding secured US$1.18 billion in the first quarter of 2023, and the latest order win will bring the total announced contracts to about US$1.36 billion. The company has a target to secure US$3 billion of new orders in 2023.

These vessels are third generation combination carriers that are designed to provide higher efficiency compared to the traditional bulk carrier. 

This is because combination carriers can transport both dry and wet bulk cargoes. As a result, there is a higher likelihood that they will be utilized when traveling to and returning from their pick-up destinations. 

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Source: Klaveness Combination Carriers

 

#2 – Order from repeat customer

This is not the first time that Klaveness has placed an order with Yangzijiang Shipbuilding.

Yangzijiang Shipbuilding has successfully delivered eight combination carriers to Klaveness between 2019 to 2021.

The repeat order by the Norwegian customer is seen as a reflection of the track record that Yangzijiang Shipbuilding has in delivering quality vessels to its customers. 

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Source: Klaveness Combination Carriers

 

#3 – Shift towards greener vessels 

Most importantly, the newbuild vessels are intended to replace Klaveness’ older vessels, and are expected to reduce overall carbon dioxide emissions by about 35%.

This is because of its fuel-efficient features such as wind-assisted propulsion and improved cargo carrying capacity.

Klaveness has a target to be carbon neutral by 2030, and has previously secured a sustainability linked loan to finance the construction of its combination carriers. 

As part of its ESG initiatives, Yangzijiang Shipbuilding is actively developing clean energy vessels. 

The company has secured 31 units of LNG dual-fuel containerships, as well as various LNG carriers.

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Source: Yangzijiang Shipbuilding 

 

What would Beansprout do?

Yangzijiang Shipbuilding was one of the top performers of the STI in 2022, due to the spin-off of its investment arm Yangzijiang Financial Holdings and strong order wins of US$4.4 billion.  

However, its share price has stayed flat so far this year, due to concerns about a slower pace of new order wins with weakness in the global economy. 

The latest order win has helped to grow Yangzijiang's orderbook and allowed the company to gain traction towards building more fuel-efficient vessels.  

We’ll be looking out for its upcoming first half earnings report in August to determine if its order momentum is sustained, or if the global economic slowdown has indeed led to weaker pace of ordering activity.   

The consensus target price for Yangzijiang Shipbuilding is S$1.57 as of 26 June 2023. This is 18% higher than its current share price of S$1.34.  

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Source: SGX and Refinitiv as of 26 June 2023

 

Yangzijiang Shipbuilding has paid a dividend per share of S$0.05 in the past two years. Based on its current share price of S$1.34, this would represent a dividend yield of 3.7%

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Source: Yangzijiang Shipbuilding 

 

Update on 26th June: Yangzijiang secured further new orders that would bring its orderbook to a record high of US$14.6 billion. Find out what this means for Yangzijiang's share price. 

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