Equity Recommendation

Why is money rich Yangzijiang doing a money call?

Equity RecommendationSINGAPORE (Equity Recommendation): OCBC thinks Yangzijiang Shipbuilding (YZJ) is propelling an offer arrangement exercise to embrace critical mergers and acquisitions ahead in spite of the fact that the gathering has huge money assets.

As at 1H17 finished June, the gathering had RMB6.3 billion ($1.3 billion) in real money and money counterparts, RMB6.0 billion of current held-to-development monetary resources, RMB1.1 billion of current accessible available to be purchased budgetary resources and RMB724 million of budgetary resources at reasonable incentive through benefit or misfortune.

Under non-current resources, there were RMB4.6 billion of held-to-development monetary resources and RMB200 million of accessible available to be purchased money related resources. This is against current borrowings of RMB5.2 billion and non-current borrowings of RMB801 million.

Yet, a huge segment of YZJ’s money could be held by its backups in China, says investigator Low Pei Hwa in a Monday report and China’s expanded examination as of late finished capital developments after certain prominent occurrences prompted more capital controls.

After YZJ declared the offer position on Aug 31, its offer cost has dropped 13% from a high of $1.625 on Aug 30 to $1.41 as at 11.13am.

Around 137 million new offers – or 3.6% of issued shares – will be set out at $1.53 each to raise net continues of $209 million.

“The arrangement would in this manner enable YZJ to attempt more noteworthy abroad acquisitions,” says Low.

With respect to the stock, Low trusts that a considerable lot of new requests desire has been prepared into the offer cost.

“We change our assessments to represent the situation and alter our P/B for the shipbuilding fragment from 1.3x to 1.2x, in accordance with the decrease in industry normal, prompting a reasonable esteem gauge of $1.48. Look after hold,” finishes up the expert.

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