Yangzijiang in Takeover Talks as Slump Damps Prices

Yangzijiang Shipbuilding Holdings Ltd., the biggest Chinese shipbuilder listed in Singapore, is in talks to buy shipyards after an industrywide slump in orders last year damped prices “We are in active negotiations,” Zhang Yao, head of the company’s board of directors’ office, said on Aug. 23 by phone from Jiangyin, eastern China, without naming any targets. “Asset prices for potential acquisitions are reasonable and may become even more so as some smaller shipyards may have cash-flow problems.”
The company in June bought control of Jiangsu Changbo Shipyard Co. as the end of the global recession prompted shipping lines to start buying new vessels. China has also encouraged consolidation in the shipbuilding industry to reduce excess capacity after orders slumped 55 percent last year, according to government figures.
“Though container ship enquiries are slowly increasing” Yangzijiang and its rival Cosco Corp. Singapore Ltd. are both starting to be cautious on new bulk carrier orders, Low Pei Han, an analyst at OCBC Investment Research Pte in Singapore, wrote in a note today. Low recommends buying Yangzijiang stock “for its good execution ability, track record and significant order book.”
Yangzijiang Shipbuilding was unchanged at S$1.51 in Singapore at the 12:30 p.m. midday trading break. The stock has risen 25 percent this year, compared with an 0.8 percent gain for the Straits Times Index and Cosco’s 30 percent advance.
Demand ‘Slowly Recovering’
“Demand is slowly recovering and the orders are starting to stream in,” Zhang said. The company is seeing more demand for container ships rather than dry-bulk vessels, he said.
The shipbuilder is also trying to boost its scrapping and repair operations, as well as seeking to develop a marine- engineering business, to help guard against fluctuations in vessel prices, Zhang said.
Net income in the second quarter rose 32 percent to 800.5 million yuan ($118 million) from a year earlier and sales gained 23 percent to 3.1 billion yuan, Yangzijiang reported Aug. 11.
The shipbuilder said earlier this week that it had agreed to buy land and a wharf for 107.7 million yuan in the eastern Chinese province of Jiangsu, to expand its shipbuilding capacity.
The company bought 51 percent of Jiangsu Changbo for 51 million yuan in June and injected 105.1 million yuan to increase capital reserves. Jiangsu Changbo had an order book worth $338 million, comprising 20 vessels scheduled to be delivered between the second half of this year and the middle of 2012, according to a June 28 statement.