INDUSTRIAL CONGLOMERATES + INDUSTRIAL GOODS, SHIPBUILDING
Yangzijiang Shipbuilding (Holdings) is the overall winner in the industrial conglomerates and goods sector. The company, one of China’s leading private shipbuilders, also comes in top for generating the highest returns to shareholders in the three financial years taken into consideration for this year’s Billion Dollar Club (BDC). Meanwhile, Singapore Technologies Engineering S63 is the winner for generating the best weighted return on equity (ROE) within this category. There is no winner in the profit after tax (PAT) growth category.
Yangzijiang Shipbuilding can trace its history back to 1956, when it was started as a shipbuilding cooperative. Following years of growth, the company has three giant dry docks and three large- and medium-sized slipways, with an annual shipbuilding production capacity of 7 million dwt. It manufactures large and medium-sized container ships, bulk carriers, oil tankers, liquid carriers and other clean energy ships, multi-purpose ships, and ocean engineering equipment too. Its shipbuilding output has earned it a top-five rank in China’s shipbuilding industry since 2009.
Yangzijiang Shipbuilding was listed on the Singapore Exchange S68 (SGX) in 2007, near the start of a listing wave of small China-based companies dubbed “S-chips”. However, the company differed from most S-chips because of the RMB5.5 billion raised back then, which put it in the big league and was included as a component stock of the Straits Times Index.
In recent years, Yangzijiang Shipbuilding has steadily grown its top and bottom lines as shipping demand recovers. Following the inroads it made into green shipbuilding, its order book composition has been transformed progressively, with more weightage towards clean vessel types. As of June 30, the US$5.8 billion ($7.9 billion) in new contracts won for 72 vessels include 10 units of LNG dual-fuel containerships and 10 units of methanol dual-fuel containerships. These orders brought its total outstanding order book in 1HFY2023 ended June to US$14.7 billion for 181 vessels. Clean energy vessels now represent 56% of its total value of contracts, compared to 23% recorded 12 months ago.
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A significant contributor to Yangzijiang Shipbuilding’s total returns to shareholders came from the spinning off and listing of its financial services arm. On April 22, Yangzijiang Financial Holding YF8 , with a book value of $4.3 billion as of December 2021, was listed on the Singapore Exchange. Under the listing terms, Yangzijiang Shipbuilding’s shareholders were entitled to a share of Yangzijiang Financial Holding for each share they held. For the three years under consideration, Yangzijiang Shipbuilding’s returns to shareholder grew at a CAGR of 40.7%.
According to Yangzijiang Shipbuilding, the spinoff would give the financial services unit an independent platform to raise more funds to grow its investing and wealth management services across the region instead of focusing mainly on debt which was the case before the spinoff. As for Yangzijiang, Shipbuilding, it would become a more pure-play shipbuilding and shipping business, making it more directly comparable to other global names.
ST Engineering, another index stock, with a weighted ROE of 23% in the three years under review in this year’s BDC, has been named winner of this category. In recent years, the company has undergone some internal restructuring so its new business units can better capture new markets. Its three key business areas now are defence and public security, commercial aerospace, and smart cities and urban solutions. To beef up its capabilities and to gain new beachheads, ST Engineering, in March 2022, completed its largest acquisition, paying US$2.7 billion for the US-based traffic management system TransCore.
