Embattled Yangzijiang Shipbuilding has received a major vote of confidence from a top Singapore brokerage, which has upgraded the stock to a buy.
UOB Kay Hian Holdings said the shares in the Singapore-listed company offer a potential 49% return for investors as it looks set to benefit from increased newbuilding demand.
Analyst Adrian Loh described concerns about corporate governance issues surrounding Yangzijiang chairman Ren Yuanlin as a “non-event in our view”.
He said Yangzijiang was poised to benefit from a weaker Chinese yuan versus the South Korean won and new orders as a result of IMO 2020.
Loh forecast that order wins will improve to $1.5bn in 2020 from the order projections of $1bn expected for 2019.
The analyst said Yangzijiang noted that newbuilding enquires have been stronger compared to the first half of 2019.
“Its inexpensive valuation of 0.56 times P/B [price to book ratio] and potential near-term newsflow on order wins has led us to upgrade Yangzijiang to a buy with a P/B-based price target of SGD 1.46 ($1.05),” said Loh.
Potential share price catalysts include new shipbuilding order announcements, specifically from Japanese shipowners due to the positive synergistic effects of the Mitsui E&S joint venture and news that the chairman is "no longer assisting the Chinese authorities with their investigations", he added.