Nomura downgrades Yangzijiang to reduce

Nomura cut its rating on Yangzijiang Shipbuilding (Holdings) Ltd to reduce from neutral, and decreased its target price to S$0.74 from S$0.85, citing weak pricing and lacklustre demand for new orders.
"Due to falling new orders and shrinking margins, revenues and profit from the core shipbuilding segment are expected to shrink. However, earnings will continue to be held up by non-core investment income and other gains which are coming in higher than expected," the broker said.
It said recent orders won by the shipbuilder were done at an average price of $28 million, substantially lower than the $35 million a similar order would have fetched previously.
Yangzijiang's shares were up 0.4 percent at S$1.26 and have gained 38 percent so far this year.
"We like the company for its proactive approach in securing new shipbuilding contracts. However, we remain negative on the overall industry outlook and think it is hard to right the tide," Nomura said, adding that the shares were likely to weaken due to the negative shipping outlook after a strong run.