Can Yangzijiang diversify itself out of a doldrum?
SINGAPORE (July 18): Yangzijiang Shipbuilding is diversify its business and venturing into new areas of expertise given an upturn in the offshore & marine industry is nowhere to be seen.
In its latest move, Yangzijiang acquired a 55% stake in Odfjell Terminal, Jiangyin (OTJ) for US$46.2 million ($62.8 million) from Norwegian tanker shipping company Odfjell.
OTJ handles various types of petrochemical products and provides terminal services for petrochemical distribution in the upstream Yangtze River region.
The terminal also has a total tank storage capacity of 99,800 cubic metres as well as eight berths which can handle coasters, barges and deep-sea tankers.
Last October, Yangzijiang took a 51% stake in a joint venture company it incorporated with MEX-EC and Mitsui to build commercial vessels.
See: Yangzijiang partners MEX-EX, Mitsui to construct commercial vessels
A new area of expertise for the shipbuilder, total capital outlay for the JVCo is expected to top US$299 million.
Ren Yuanlin, executive chairman of Yangzijiang, said at that time, “The establishment of the New Joint Venture will enhance YZJ Group’s competitiveness and preserve the dominant position for Chinese shipbuilders in the ongoing consolidation of the global shipbuilding industry.”
Earlier in June, Yangzijiang also acquired a 10.6% stake in Suzhou Jiumei Fibre Glass - worth $12.6 million.
This was seen as an opportunity for the shipbuilder to break into the upstream industry in order to secure the supply of the shipbuilding materials and better control costs.
See: Yangzijiang Shipbuilding acquires a 10.6% stake in Suzhou Jiumei Fiber Glass for $12.6 mil
In a recent report, DBS Group Research says the acquisition of OTJ did not come cheap, given the acquisition price translates to 2.6 times its FY18 book value and at 3.3 times NTA.
However, with China’s natural gas consumption is expanding at a double-digit rate, Yangzijiang could unlock much potential from OTJ.
In addition, Yangzijiang is also said to be applying for a licence to operate LNG terminals, which could help it reel in newbuild orders for LNG carriers.
Having shown excellent execution and with proven track record since its listing in 2007, DBS is maintaining its “buy” call on Yangzijiang with a target price of $1.82.
Shares in Yangzijiang closed 1 cent higher at $1.51 on Thursday, implying a dividend yield of 3.3%
