With reference to the 1H FY08 result announced on 12th Aug 08, following is a brief summary of it.
1. Revenue for 1H FY08 up 145% to RMB 3.467b as compared to 1H FY07 of RMB 1.416b.
2. Gross Profit for 1H FY08 up 161% to RMB 659.2m as compared to 1H FY07 of RMB 340.3m.
3. Net Profit for 1H FY08 up 125% to RMB 753.8m as compared to 1H FY07 of RMB 334.5m
4. EPS for 2Q FY08 is 10.25 RMB cents as compared to 2Q FY07 of 5.28 RMB cents.
5. NAV for 1H FY08 is 152.01 RMB cents as compared to 1H FY07 of 114.91 RMB cents
Yangzijiang increased in revenue was due to increase in productivity and greater contribution from JNYS. Gross profit margin depsite go up but was affected by increase in steel prices and the weakening of USD against RMB.
Analysts' responses to the result are as followed.
1. CLSA upgrades to underperform from sell, maintains target price $0.64
2. HSBC maintains neutral rating, cut target price from $1.05 to $0.65
3. DBSV maintains hold rating, cut target price from $1.45 to $0.75
Assuming the rising steel prices and the exchange rate of USD/RMB do not further deteriorate the profit margin of Yangzjjiang for the rest of FY08, a conservative estimation of FY08 EPS would be 41 RMB cents ( approx 8.2 S cents ). At 15th Aug 08 price of $0.635, this translates into 7.7x FY08 PE. Following is the list of valuation derived using the conservative estimation of FY08 EPS of 41 RMB cents.
15x FY08 PE -- $1.23
14x FY08 PE -- $1.15
13x FY08 PE -- $1.07
12x FY08 PE -- $0.985
11x FY08 PE -- $0.900
10x FY08 PE -- $0.820
9x FY08 PE -- $0.740
8x FY08 PE -- $0.655
7x FY08 PE -- $0.575
6x FY08 PE -- $0.495
5x FY08 PE -- $0.410
Technically, since the breakdown at $0.765, price of Yangzijiang has hit new historical low of $0.615. As price has fallen into uncharted region, the support could not be easily derived from TA. Investors who have keen interest in Yangzijang perhaps should look from FA point of view to gauge for an entry price level. At 5x FY08 PE of $0.41 should have a good margin of safety to hold for long term.
A little cautious for investors on Yangzijiang is that if the price level for the rest of the year is unable to move back up to the $1 and above level, its market cap could potentially squeeze it out of the STI 30 component stocks. In year 2007, average price for Yangzijiang was about $2.065 ( $2.87 high, $1.26 low ) and since Jan 08 till present, average price of Yangzijiang is about $1.2875 ( $1.96 high, $0.615 low ); that is about 38% drop in price level or market cap.
