Brokers' take

Compiled by Navin Sregantan

YANGZIJIANG SHIPBUILDING

| BUY (UPGRADED)
SEPT 10 CLOSE: $1.01
TARGET PRICE: $1.46
UOB Kay Hian, Sept 10

We recently met Yangzijiang's management for an update on the company's operations and commentary regarding its chairman. The latter is a non-event as it does not involve the company or its funds, while the mid-term shipbuilding outlook appears positive.

Last week, Yangzijiang announced a new order win for three 82,000 dwt bulk carriers and two 325,000 dwt bulk carriers. While no contract value was disclosed, we estimate this order at approximately US$250 million.

Year-to-date order wins now total US$604 million and is comfortably approaching our 2019 order-win estimate of US$1 billion. We forecast that order wins will improve to US$1.5 billion in 2020.

Share price catalysts are (i) new shipbuilding order announcements, specifically from Japanese shipowners due to the positive synergistic effects of the joint venture with Mitsui to build commercial vessels and (ii) news that the chairman is no longer assisting in the Chinese authorities' investigations.

Yangzijiang's inexpensive valuation of 0.56 time price-to-book (2 standard deviations below its 5-year average) and potential near-term newsflow on order wins has led us to upgrade our call to "buy" with a price target of $1.46.

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AVI-TECH ELECTRONICS

| NEUTRAL (MAINTAINED)
SEPT 10 CLOSE: $0.31
TARGET PRICE: $0.31
RHB Research Institute, Sept 10

The deceleration in the semiconductor sector will likely slowly improve in subsequent quarters. With a net cash balance sheet and a strong operating free cash flow, we believe Avi-Tech Electronics will continue to reward shareholders with attractive dividends.

This is despite the drop in profits.

Its engineering segment will remain weak in subsequent quarters, but an improvement in the trade war situation should be a key positive catalyst.

We believe Avi-Tech's long-term growth prospects are still intact, in line with the digitalisation and macroeconomic trends, as well as the increase in usage of electronics in the automotive sector.

This is on top of Smart City initiatives commencing around the region.

We expect FY2020 to be better than FY2019, and lift our target price after increasing estimated FY2020-2021 earnings by 5 per cent.

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