Brokers’ take

Compiled by Navin Sregantan

YANGZIJIANG SHIPBUILDING | HOLD (DOWNGRADED)

MARCH 4 CLOSE: $1.43
FAIR VALUE: $1.44

OCBC Investment Research, March 4

Yangzijiang Shipbuilding reported a 22 per cent year-on-year fall in revenue but saw an 84 per cent rise in net profit to 1.2 billion yuan in Q4, bringing full year net profit to 3.6 billion yuan (S$730 million), a 23 per cent increase compared to FY2017.

Results beat our expectations and the street's, aided by 494 million yuan of other income in Q4 FY2018, 344 million yuan of forex gains, and other one-offs.

The shipping market, however, is weak and YZJ is pivoting from bulkers and containers (which used to be its bread and butter) to tankers and LNG carriers.

It is still hoping to secure US$2 billion (S$2.7 billion) in new orders in FY2019.

As for the stock, it has performed extremely well, for it is up about 70 per cent from mid-July.

At current levels, YZJ is trading at about nine times forward price-to-earnings ratio and 0.9 times the price-to-book ratio. We think most of its positives have been priced in.

We fine-tune our estimates and our FV rises from $1.41 to $1.44.

CSE GLOBAL | BUY (MAINTAINED)

MARCH 4 CLOSE: $0.505
TARGET PRICE: $0.58

KGI Securities, March 4

CSE Global reported a Q4 2018 net profit of $5.1 million compared to a loss of $37.1 million in Q4 2017.

It declared a final dividend of 1.5 cents, bringing the full-year dividend to 2.75 cents.

CSE won $384 million of new orders in FY2018 and closed the year with a net order book of $181 million.

The new orders were in line with our expectations and brings its net order book to a similar level as FY2015.

We expect CSE to secure $400 million in new orders in FY2019, before stabilising at $450 million a year thereafter.

On future growth, the group is actively looking for earnings accretive acquisitions and is in the process of registering to be a supplier to Petronas.

We estimate that CSE can sustain a yearly dividend of 2.75 cents going forward as its balance sheet remains in net cash position of $38 million while free cash flows are sufficient to cover the annual dividend payout of $14 million.

CSE is attractive in our view given its solid balance sheet, asset light model and stable recurring free cash flows.

We believe that average earnings per share growth of around 16 per cent a year over the next three years is achievable on the back of improving industry dynamics.

Risks to our view include margin pressures due to competition and lower than expected new order wins.

Meanwhile, there are foreign exchange risks due to its exposure to US dollar, Australian dollar and euro.

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