T Rowe Price Associates, a substantial shareholder of Yangzijiang Shipbuilding (Holdings), has trimmed its stake in the shipbuilder.
On Jan 27, the US-based asset manager sold 4.81 million shares at $1.2844 each. T Rowe Price now holds just over 275 million shares, equivalent to 6.96%, down from 279.8 million shares, or 7.08%.
According to regulatory filings, T Rowe Price also sold some shares last October at an average price of $1.216 each. This followed an earlier acquisition on June 6, 2022, at 99.9 cents each.
In early January, Yangzijiang Shipbuilding’s shares fell on reports that a former customer, a Liberian company called Trinity, had filed an application to wind up one of its subsidiaries, Yangzijiang Shipping, in its efforts to recover US$4.8 million ($6.3 million).
According to a Jan 8 announcement by Yangzijiang Shipbuilding, the claim was said to be the arbitration outcome of a dispute between the two parties and consisted of US$3.25 million in damages plus accrued interest of US$1.59 million. Yangzijiang Shipping had earlier sold an oil tanker to Trinity.
On Jan 16, Yangzijiang Shipping filed an affidavit opposing Trinity’s application, giving the latter four weeks to respond. A case conference is set to take place on March 2.
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Yangzijiang Shipbuilding pointed out that the amount claimed is immaterial to its net tangible asset value or its earnings. As at June 30, 2022, the company’s net asset value was RMB16.5 billion ($3.21 billion), or 81.4 cents per share. The company has an order book of more than US$10 billion.
In 1HFY2022 ended June 30, 2022, Yangzijiang Shipbuilding reported earnings from continuing operations of RMB1.17 billion, up 32% y-o-y. Revenue in the same period was up 70% y-o-y to RMB9.7 billion.
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A call to buy
UOB Kay Hian analyst Adrian Loh says the case is a “non-event”.
In his Jan 10 report, Loh upgraded his call on the stock to “buy” with an unchanged target price of $1.55, which is based on a 9x FY2023 earnings and 1 standard deviation above the company’s five-year average of 6.7x which Loh believes is “fair” given the visibility of its earnings, thanks to an order book of more than US$10 billion. On top of this amount, Loh sees another US$400 million worth of contracts likely to be added soon.
In addition, Loh says Yangzijiang Shipbuilding can potentially double its dividend payout for FY2023. He points out that historically the company has paid a dividend of 4 cents per share to 5 cents per share.
Yangzijiang Shipbuilding sits on around 19 cents per share in cash as at end-June 2022. Given the company has no funding needs for growth and capital expenditure, or to fund its debt investment business that has been spun off, Loh says that if half this cash hoard is paid out, this will translate into a yield of 9.5%.
The way Loh sees it, further upside will come from margin expansion from 2023 onwards and new orders in higher-margin shipbuilding segments, such as dual-fuel containerships, LPG tankers or large LNG carriers.
Elsewhere, Delfi, the manufacturer of confectionery, saw one of its substantial shareholders trim its stake too. First Pacific Advisors, a Los Angeles-based asset management firm, on Jan 27 sold 50,300 shares on the open market for $43,650.34, which works out to 86.8 cents each. First Pacific Advisors now hold 48.85 million shares, equivalent to 7.993%, down from 48.9 million shares, or 8.002% earlier.
Just 10 days earlier, Lee Mee Lan, wife of Delfi’s CEO John Chuang Tiong Choon, saw her deemed interest in the company increase to nearly 319.48 million shares, equivalent to 52.27%, from around 316.98 million shares, or 51.86%. This was after investment holding companies controlled by her had acquired 2.5 million shares on the open market at 78 cents each.
In Delfi’s 3QFY2022 ended Sept 30, 2022, business update on Nov 15, revenue increased 28.7% y-o-y to $112 million. Operating profit in the same period surged by 116% y-o-y to $13.7 million as the company’s investments in driving sales of its own branded products generated results.
