Yangzijiang Shipbuilding has been working behind the scenes in a bid to reassure investors that it is business as usual, TradeWinds has learnt.
Chief financial officer Liu Hua is reported to have hosted an investor conference call late last week to reassure the local investment community.
She is reported to have said on the call that the chairman Ren Yuanlin’s assistance with a Communist Party of China investigation is “not related to the group”.
Details of the conference call come in a research note issued by Singapore’s largest bank DBS, which hosted the call with investors.
Yangzijiang said that while Ren Yuanlin has been the prominent figure in the company, his son, Ren Letian succeeded him as chief executive in March 2015.
It claimed that the shipbuilding business has “done well in the past four years under the new CEO’s leadership” as the chairman took a step back to focus on the investment segment.
It added that its ability to secure contracts should “not be impacted” and that existing shipbuilding customers who have expressed concerns over this incident have been “comforted by the clarification”.
Management is reported to have said that its bankers have "expressed confidence with Yangzijiang" and that this event should not trigger loan reviews.
They also “remains confident” of securing $1.5bn-$2bn worth of new orders this year, despite slow year-to-date wins of just SGD $209m ($150.4m)
Yangzijiang said the order pipeline includes “high-value mega vessels” such as 13,900-teu and 23,000-teu containerships and 210,000-dwt to 326,000-dwt bulk carriers with newbuild prices ranging from US$50m-$150m for each vessel.
“We believe the clarification should alleviate some concerns, but the chairman’s assistance in the investigation will likely remain as an overhang and cause volatility in its share price, aggravated by short-sellers, until the dust settles,” said DBS analyst Pei Hwa Ho.
“The share price tanked ~25% as the news unfolded and a further~25% upon resumption of trading.
“While stock has since bounced off its low, it has lost almost one quarter of its market cap despite the yard’s non-involvement in the investigation.”
Ho said that more clarity on the chairman’s role in the investigation, and strong contract flows could restore investors’ confidence and remove the share price overhang.
“The stock is now trading at 0.6x PB, near its cash level, representing 25% / 65% discount to its global and Chinese peers, notwithstanding its higher ROE and dividend yield,” she said.
“We estimate that including financial assets, net cash accounts for 95 Singapore cents out of its book value per share of SGD $1.55.”
