- With the successful spin-off of YZJFH, Yangzijiang Shipbuilding investors’ grouse of ‘shadow banking’ from its debt investments should dissipate, re-rating the stock.
- We adjust our model to ‘carve-out’ YZJFH, arriving at a new TP of S$1.63 (10x CY23F P/E and implied 1.7x FY22F P/BV, supported by its 15% ROE).
- Strong cash conversion cycle should put YZJ in Rmb4.9bn net cash by end FY22F. We pencil in a DPS of 5 Scts (39% payout) for FY22F, a 5.7% yield.
- Key investment thesis in YZJ now lies on its strong shipbuilding execution, attractive valuations of 6x CY23F P/E, and potential higher dividend payout.
Excerpts from CGS CIMB report