Yangzijiang shares rebound sharply as it allays jitters (BT)

It quashes talk of bond issue, says H1 profit to grow at least 30%

By JOYCE HOOI

YANGZIJIANG Shipbuilding Holdings' (YZJ's) stock price rebounded strongly yesterday, as the shipbuilder reassured a jittery market of its prospects. It closed 7.3 per cent - or 9 cents - higher, at $1.325.

On Monday, the stock dived 5.7 per cent to hit a 13-month low of $1.235.

In a corporate update yesterday, the firm put paid to rumours that it might be issuing convertible bonds, saying, 'there is currently no immediate convertible bond financing plan in the pipeline'.

In response to a Reuters report on Monday that noted how more than 70 per cent of the group's revenue had European exposure, YZJ also said that it had seen 'a diversification of its customers' portfolio away from European based customers'. It also said that its existing European customers had strong financial standing and payment track record.

Barclays Capital Research's Jon Windham said in a report yesterday: 'In this case, a 'quick screen' of European exposure is misleading. In 2010, YZJ's sales were over 70 per cent to European clients because this is based on the location of the ship financing vehicle, not based on the end customer.'

Mr Windham currently has an 'overweight' rating with a target price of $2.20 on the stock.

YZJ's update came on the tail-end of a prolonged sell-down of the stock. Market watchers had speculated that the price plunge had been driven by pessimism about the dry bulk sector - a mainstay of Yangzijiang's revenue - and worries about the worsening debt crisis in the eurozone.

'While the order outlook for bulk carriers has turned negative...order flow has been supported by the containership segment. We believe existing orderbook of about US$7 billion is sufficient to keep the yard busy for the next three years,' said analyst Jason Saw from DMG & Partners Research in a report yesterday.

He maintained his 'buy' rating with a target price of $1.98 on the stock.

YZJ also said that net profit for the first half of the year - to be released early next month - is set to grow by at least 30 per cent year on year and hinted that it might carry out a share buyback to 'protect minority shareholders' interest' if the share price continues to fall 'without fundamentals'.

Ho Pei Hwa, an analyst with DBS Group Research, said in a report yesterday that a share buyback is likely, noting that YZJ had repurchased 228 million shares in 2008 when its share price had been in a slump as well.

'We believe Yangzijiang's share price weakness could also stem from revived corporate governance concerns among S-chips in addition to sluggish shipping outlook and market sentiment. The clarification of no convertible bonds issuance in the pipeline should ease investors' concerns, and lift share price performance in the near term,' said Ms Ho, who has a 'buy' rating with a target price of $2.70 on the stock.

Since the start of the year, YZJ has seen its stock price fall by 34 per cent, following a bullish run that had lasted throughout the second half of last year.