The news: Company announced that: (1) Seaspan has made effective all seven of the 10,000
TEU container ship orders; and (2) its wholly owned subsidiary, Jiangsu Shipbuilding Co Ltd,
entered into an agreement to acquire 31.5% stake in Wuxi Runyuan Technology Microfinance, a
licensed lender to small/mid technology enterprises, for RMB94.5m.
Our thoughts: We are neutral on the shipbuilding sector given over supply conditions
(especially for bulk carriers) but like YZJ given its strong order book, execution and
undemanding valuation at 6.4x FY12F P/E. YZJ has made remarkable progress to gain new
market share in the newbuild container ship segment and we think the shipyard is equipped to
challenge the South Korean shipyards for new orders. We think the continued expansion in
microfinance is purely opportunistic to generate higher return on cash. As of 30 Jun 2011, YZJ has RMB2.8b (S$528m) unrestricted cash, and this is equivalent to 13% of its market cap. Our S$1.62 target price is based on 10x FY12F P/E and stock offers 4.3% net yield.
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