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Yangzijiang Shipbuilding Holdings Ltd. - Will inclusion in the government's White List boost sales?

28/11/2014 – Yangzijiang Shipbuilding (Holdings) Ltd maintains it is well-positioned to lead the shipbuilding industry in China, even as the China Association of The National Shipbuilding Industry (CANSI) warns new ship prices will remain subdued.

The Chinese shipbuilder also mentions its entry into the Chinese government's White List of shipyards published in September this year, where those making the list have dominant market positions and account for 72%, or a total of 7.9 mln compensated gross tonnage of total vessel deliveries in China year-to-date.

Marine Log published the names of the 51 shipyards on the White List in this September 5, 2014 article.

Jiangsu New Yangzi Shipbuilding Co., Ltd, one of Yangzijiang's six shipyard companies located along the Yangtze River, was second on the White List.

It is not immediately clear or verifiable if there is tangible advantage from being in this position on the list.

Reuters added further context to the White List announcement in this article where it stated that an industry official indicates the intention for publishing two more lists, without giving a timeframe.

China is working on turning around its shipbuilding industry this year after underperformance in the past when overcapacity became a problem.

This April 28, 2014 Seatrade Globalarticle provides more context to the Chinese shipbuilding industry.

Yangzijiang also maintains it is still en route to returning to its core business of shipbuilding by reducing existing non-shipbuilding businesses.

Analysts were unanimously bullish on the stock as the third quarter performance exceeded their expectations.

They were approving of the company's strong financials, including high returns from investment assets, the Chinese government's inclusion into its White List of shipbuilding companies, and the strong order total of US$4.6 bln.

The company just announced earnings for Q3FY14:
Revenue: +2% to CNY3.74 bln
Profit: -1% to CNY811.2 mln
Cash flow from operations: CNY1.98 bln vs (CNY1.54 bln)
Dividend: Nil
Order book: US$4.6 bln

Revenue increased by 2% led by the company's shipbuilding and related operations, of which shipbuilding alone comprised 93% of the total CNY3.74 bln.

A total of eight vessels were delivered on schedule, the same number as in the corresponding period.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question
Question

1. Can it lead in the government White List of shipyards?

On the White List of shipyards are competitors including the heavily indebted China Rongsheng Heavy Industries Group Holdings Ltd, China's largest private shipbuilder.

The government has intervened in the case of China Rongsheng, which is expected to complete its Jiangsu shipyard restructuring in June 2015.

Notwithstanding competition from the other shipyards on the White List, this lull time for China Rongsheng could give Yangzijiang's New Yangzi Shipbuilding Co., Ltd shipyard an edge until June.

But is this enough to turn the tables significantly as Yangzijiang already has US$4.6 bln in orders to fill?

Could it still be shoring up new orders from companies on China Rongsheng's client list?

And what are the advantages Yangzijiang currently has over the other 49 shipyards on the White List?

Question
Question

2. What about its five other shipyards not on the White List?

Yangzijiang's other shipyard companies also on the Yangtze River but not among the 51 on the White List are:

- Jiangsu Yangzi Xinfu Shipbuilding Co., Ltd;
- Jiangsu Yangzijiang Shipbuilding Co., Ltd;
- Jiangsu Huayuan Metal Processing Co., Ltd;
- Jiangsu Yangzijiang Offshore Engineering Co., Ltd;
- Jiangsu Yangzi Changbo Shipbuilding Co., Ltd

Why did they not make it onto the White List?

(Read the full story to get all 13 questions)

We have invited the company to an on-camera interview, and/or to reply to our questions in writing.

At the time of publication we have not received a reply (which is why you are seeing this message).

We will update this report if we do.


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